Should the fed cut interest rates?

[bdgan]

I think so for two reasons:

1. The Fed typically keeps rates high in order to slow an overheated economy (ie reduce inflation). I think any current inflation is largely due to the war/gas prices, not because the economy is overheating.
2. The country needs lower rates in order to keep interest expense low. I realize that it wouldn't do much to lower longer term mortgage interest rates.

 

[noleclone2]

I think so for two reasons:

1. The Fed typically keeps rates high in order to slow an overheated economy (ie reduce inflation). I think any current inflation is largely due to the war/gas prices, not because the economy is overheating.
2. The country needs lower rates in order to keep interest expense low. I realize that it wouldn't do much to lower longer term mortgage interest rates.

It’s more complicated than that and not just gas. Inflation is heating up. Also mortgages are not always tied directly to fed and can nudge down even without a drop. I think holding par is best move because raising them could really cause a meltdown.

 

[RoseBowlorBust]

No they should be raised its all going to come crashing down soon.

 

[FLaw47]

No. Trump's obsession with low interest rates made the pandemic recession worse than it otherwise would have been; we didn't have any levers to pull.

 

[JayDeeSC]

We are really between a rock and a hard place. The problem here is that the current inflation spike is not being caused by people buying too many TVs. The current inflationary environment has risen from from supply shortages, housing shortages, energy costs, insurance spikes, and years of distorted markets. Raising rates does not create more houses, oil, truck drivers, or inventory. What higher rates do create is debt stress. At some point, the cure becomes more dangerous than the disease. The economy became addicted to cheap money for 15 years. You cannot run an economy this leveraged in this supply environment, and then raise the cost of money without something breaking. Unfortunately, it will be felt the most by the working class folks.

 

[Fasteddie24]

No. Trump's obsession with low interest rates made the pandemic recession worse than it otherwise would have been; we didn't have any levers to pull.

Interest rates dropped to rock bottom from dec 20 to July 22. Trump had nothing to do with what you are talking about. Plus that 17 months Biden 1 month Trump

 

[FLaw47]

Right before COVID, the Fed had already cut rates down to 1.50% to 1.75% by the end of 2019, then lowered them again to 1.00% to 1.25% on March 3, 2020. In the emergency March 16, 2020 move, it cut them all the way to 0% to 0.25%. So yeah, rates were already really low before the pandemic when we had a strong economy (which typically supports higher rates).

 

[Jonathan Assbutt Jr.]

I like inflation personally, so cut away

 

[bdgan]

It’s more complicated than that and not just gas. Inflation is heating up. Also mortgages are not always tied directly to fed and can nudge down even without a drop. I think holding par is best move because raising them could really cause a meltdown.

I think inflation is almost all related to oil prices. It's not just the price of gasoline.
I clearly stated that reducing the fed rate wouldn't change long term rates.

 

[bdgan]

We are really between a rock and a hard place. The problem here is that the current inflation spike is not being caused by people buying too many TVs. The current inflationary environment has risen from from supply shortages, housing shortages, energy costs, insurance spikes, and years of distorted markets. Raising rates does not create more houses, oil, truck drivers, or inventory. What higher rates do create is debt stress. At some point, the cure becomes more dangerous than the disease. The economy became addicted to cheap money for 15 years. You cannot run an economy this leveraged in this supply environment, and then raise the cost of money without something breaking. Unfortunately, it will be felt the most by the working class folks.

I agree about 15 years of cheap money. Fed rates are currently 3.5%-3.75%. I'm not proposing we go back to 0.5% but I don't see a problem with a Fed rate closer to 3.0%.

 

[OnlyTheObscure]

No. People are too stupid to handle credit.

houses and cars got too expensive in part because money was so cheap and lenders were willing to lend way more than they should to people earning too little.

 

[noleclone2]

I think inflation is almost all related to oil prices. It's not just the price of gasoline.
I clearly stated that reducing the fed rate wouldn't change long term rates.

Only problem was, it was happening before hand oh and it’s not just gasoline. All thing made from petroleum as well as fertilizer. Food most especially. Your whole narrative is asinine and political to start with. “Hey we are hitting hyper inflation conditions should we not cut interest rates?”

 

[NoPuntsNoPeace]

No. People are too stupid to handle credit.

houses and cars got too expensive in part because money was so cheap and lenders were willing to lend way more than they should to people earning too little.

Have I seen this movie before?

 

[bdgan]

No. Trump's obsession with low interest rates made the pandemic recession worse than it otherwise would have been; we didn't have any levers to pull.

There was hardly any inflation during Covid. Low interest rates were still 0.2% as the economy reopened in early 2022, there was a lot of pent up demand, and people were flush with money due to stimulus payments. That's when rates should have gone up more quickly.

 

[OnlyTheObscure]

Have I seen this movie before?

Government bailed out the lenders before and nobody learned anything.

need to let them fry next go around.

also think we need to legislate fiscal responsibility. 20% down on new car loans and 10% down on home purchases. I think builders and car companies would adjust quickly.

also think everybody should be forced to have 2% taken out of their check and put into a index fund that you can’t touch until 55 or a doctor said you are terminally ill.

 

[FLaw47]

There was hardly any inflation during Covid. Low interest rates were still 0.2% as the economy reopened in early 2022, there was a lot of pent up demand, and people were flush with money due to stimulus payments. That's when rates should have gone up more quickly.

My point was that interest rates were already quite low at that start of Covid. One of the levers the Fed can pull in times of economic recession is lowering interest rates. When we hit our economic slump we were not able to reduce interest rates to spur the economy because we'd already had them irresponsibly low when there was a strong economy prior.

 

[baltimorened]

No. Trump's obsession with low interest rates made the pandemic recession worse than it otherwise would have been; we didn't have any levers to pull.

well, for sure, if Trump wants lower interest rates we need no economic analysis to know that we are against it.

 

[FLaw47]

well, for sure, if Trump wants lower interest rates we need no economic analysis to know that we are against it.

I remember enough economics to know that the general rule is "when the economy is doing well, don't decrease interest rates" and "when inflation is high, don't decrease interest rates". Yes, this is yet another examples of Trump being an idiot but we shouldn't do it because it's a bad idea, not because it's Trump's bad idea.

 

[baltimorened]

I remember enough economics to know that the general rule is "when the economy is doing well, don't decrease interest rates" and "when inflation is high, don't decrease interest rates". Yes, this is yet another examples of Trump being an idiot but we shouldn't do it because it's a bad idea, not because it's Trump's bad idea.

I agree with that

 

[fatpiggy]

No we should not lower rates at this specific time. I would like to see oil back below $80 a barrel before cutting rates.

Inflation is theft, it hurts the lowest class the most. Inflation target is 2% and we just printed 3%+.

If oil comes down and stays down, then inflation will be viewed as transitory and it may be proper to cut at that time.

I do think the Fed needs to be more nimble (if they are going to exist).

 

[Anon1750875978]

Can you imagine the Trump meltdown when the Fed is forced to raise rates in September???

It's going to be EPIC.

 

[Aardvark86]

warsh's focus on balance sheet size is sort of a nonsequitur when it comes to monetary policy in an excess reserve system.

 

[bdgan]

Only problem was, it was happening before hand oh and it’s not just gasoline. All thing made from petroleum as well as fertilizer. Food most especially. Your whole narrative is asinine and political to start with. “Hey we are hitting hyper inflation conditions should we not cut interest rates?”

Facts:

Inflation 2024 was 2.9%
Inflation 2025 was 2.6%
Inflation Jan & Feb 2026 before the war was 2.4%

Current U.S. Inflation Rates: 2000-2026

Those are the numbers but somehow you interpret that to be Trump was sending inflation higher before the war. The data doesn't support that. I think you're the one being political.

I don't want lower rates to help Trump. I think it would be good to lower rates by .5% because it would help the economy (housing & autos) and help reduce the interest expense paid by the government. I think the only risk is that lower interest rates will weaken the dollar a bit which helps exports but could make imports a bit more expensive.

 

[bdgan]

Government bailed out the lenders before and nobody learned anything.

need to let them fry next go around.

also think we need to legislate fiscal responsibility. 20% down on new car loans and 10% down on home purchases. I think builders and car companies would adjust quickly.

also think everybody should be forced to have 2% taken out of their check and put into a index fund that you can’t touch until 55 or a doctor said you are terminally ill.

I agree that the government shouldn't have bailed out of lenders but most were forced to take the loans and in spite of a few bankruptcies those loans were repaid in full + interest. Even AIG repaid their loans. I think the only losses to the government was Fannie & Freddie.

Banks already require a 20% down payment on a conventional mortgage. The low down payments (3.5%) are FHA loans that are offered to people with a 580 (low end of fair) credit rating. Banks would never offer such loans and the government won't change the low down payment. That would be considered unfair, racist, taking home ownership from lower income people, etc. But I agree that they aren't helping most people in the long run because they are required to pay an upfront fee of 1.75% + an addition 0.5% annual premium.

The forced savings is called Social Security. The problem is that the money goes to pay current retirees instead of being saved and invested for the person currently contributing.

 

[bdgan]

well, for sure, if Trump wants lower interest rates we need no economic analysis to know that we are against it.

I think every president wants lower interest rates to help the economy and make him look good. The difference is that some are quiet about it while Trump is openly vocal.

 

[bdgan]

I remember enough economics to know that the general rule is "when the economy is doing well, don't decrease interest rates" and "when inflation is high, don't decrease interest rates". Yes, this is yet another examples of Trump being an idiot but we shouldn't do it because it's a bad idea, not because it's Trump's bad idea.

But you say that the economy is doing bad

 

[kidmike41]

I think so for two reasons:

1. The Fed typically keeps rates high in order to slow an overheated economy (ie reduce inflation). I think any current inflation is largely due to the war/gas prices, not because the economy is overheating.
2. The country needs lower rates in order to keep interest expense low. I realize that it wouldn't do much to lower longer term mortgage interest rates.

No they cannot cut. Bond yields are elevated. That is what buyers are willing to pay. If the fed diverges from actual bond yields they lose their credibility.

 

[NoPuntsNoPeace]

Government bailed out the lenders before and nobody learned anything.

need to let them fry next go around.

also think we need to legislate fiscal responsibility. 20% down on new car loans and 10% down on home purchases. I think builders and car companies would adjust quickly.

also think everybody should be forced to have 2% taken out of their check and put into a index fund that you can’t touch until 55 or a doctor said you are terminally ill.

I agree with a lot of that.

But hey, probably will be the same as last time, too big to fail and all.

I think 08 probably would have been catastrophic if we did nothing, but I view it the same way as COVID PPP, should have let institutions go under and given all the bailout money directly to the citizens.

Let the market pick the winners and losers, not government.

As it is, the only lesson that was learned was the government and tax payers will always bail you out of trouble.

 

[FLaw47]

But you say that the economy is doing bad

I say that inflation is high and it's difficult to get new jobs but we're clearly not in a recession; I'm not f'ing blind.

 

[baltimorened]

But you say that the economy is doing bad

There have been many of the anti trump (at all costs) crowd that has said the economy was bad, but, in fairness, I don't think flaw has been one of them.

There are certain segments of the American people who are hurting right now, and other like many on here, who are doing just fine. Similarly, some segments are doing poorly and others are going "b-lls to the wall". But, I think that's relatively normal in our system.

 

[Rifler]

For the average investor the economy is performing well,.. If you're not invested and living paycheck to paycheck then your life probably sucks slightly more than normal, but not as much as it did with 9.0% Biden inflation...

 

[Moral]

For the average investor the economy is performing well,.. If you're not invested and living paycheck to paycheck then your life probably sucks slightly more than normal, but not as much as it did with 9.0% Biden inflation...

COVID and Ukraine Russia war inflation. The entire world was hit with that inflation and the US actually did pretty well compared to many other nations in regards to that inflation.

Trump decided to start his own war, explode gas prices on his own, get troops killed for no reason, and most likely get us a worse deal with Iran.

 

[Rifler]

COVID and Ukraine Russia war inflation. The entire world was hit with that inflation and the US actually did pretty well compared to many other nations in regards to that inflation.

Trump decided to start his own war, explode gas prices on his own, get troops killed for no reason, and most likely get us a worse deal with Iran.

Biden's actions exacerbated post covid inflationary trends by at least 3 to 4%,... Trump is still writing his presidential history.

 

[Moral]

Biden's actions exacerbated post covid inflationary trends by at least 3 to 4%,... Trump is still writing his presidential history.

You are basically complaining that Biden didn't outperform the rest of the world even more than he already did. You hold Biden to a way higher standard than Trump.

 

[Rifler]

You are basically complaining that Biden didn't outperform the rest of the world even more than he already did. You hold Biden to a way higher standard than Trump.

Not really,.. Biden's results are in the book and not very impressive,... Trump's results are still to be measured, but looking promising.

 

[Moral]

Not really,.. Biden's results are in the book and not very impressive,... Trump's results are still to be measured, but looking promising.

Delusional and dishonest.

 

[Rifler]

Delusional and dishonest.

Satisfied and anticipating more.

 

[Sullivan]

I think so for two reasons:

1. The Fed typically keeps rates high in order to slow an overheated economy (ie reduce inflation). I think any current inflation is largely due to the war/gas prices, not because the economy is overheating.
2. The country needs lower rates in order to keep interest expense low. I realize that it wouldn't do much to lower longer term mortgage interest rates.

No. The economy is too strong. I believe the Fed will hold rates where they are until at least the end of the year.

At which time, they will evaluate whether they should increase or decrease rates. Unless things change, I'm good rates staying at his level through much of 2026.

 

[Hawkedup]

No we should not lower rates at this specific time. I would like to see oil back below $80 a barrel before cutting rates.

Inflation is theft, it hurts the lowest class the most. Inflation target is 2% and we just printed 3%+.

If oil comes down and stays down, then inflation will be viewed as transitory and it may be proper to cut at that time.

I do think the Fed needs to be more nimble (if they are going to exist).

Well I’ll be damned. A post of yours I completely agree with.

It would be a big mistake to cut rates right now.

 

[Hawkedup]

warsh's focus on balance sheet size is sort of a nonsequitur when it comes to monetary policy in an excess reserve system.

This is a really good point. I could almost see Warsh cut rates just to appease trump knowing that unloading the balance sheet will have more effect on long term rates anyway. It will be interesting to see how warsh handles the balance sheet. I completely agree with reducing assets held by the reserve.