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How The Federal Reserve Just Proved It’s Right And Trump’s Wrong
Half point interest rate cut to temper the economic effects of Coronavirus might not have been possible if they’d cut willy-nilly like Trump always wants
The problem with the President’s favored policy of slashing the heck out of interest rates just as a favor to already booming businesses, is it doesn’t give you much flexibility if there’s an emergency down the road and you really need to cut rates then. Like now. Rate cuts are one of the best weapons to battle an economic slowdown. Trump’s advocated for a full point rate cut without an emergency, double what the Fed just did in response to an actual one.
Eventually there’s always going to be something urgent and bad cropping up. Which is why the Fed needs to exert excess caution if anything, and needs to operate independent of the President.
Trump’s “solution” of heading toward and even embracing negative interest rates is so not a wise option. Trump likes the “magic” of the concept: investors paying him to hang onto their money. But negative interest rates are hardly ever a sign of a robust economy. Most of the time they mean investors are so unsure of anything, they’re willing to pay the government a little to keep their cash for…
