Yesterday, I said the Fed was political. I still think it is. The FOMC met, and two commissioners voted to lower rates, while the rest went with the Chairman to not lower rates. Predictably, Trump went ballistic, which is not cool. One of the things I dislike about Trump is his initial reaction to adversity.
Trump says that every 1% cut means a savings of $385 billion in debt financing. It’s a big number. A 1% cut by the Fed would be irresponsible. I argued for .25 to.5. The EU has cut rates since their economies are sluggish. Japan raised theirs.
Today, PCE data came out. It’s one measure of inflation, and it was a bit hotter. Hence, maybe staying pat is the right decision even though other numbers say the Fed could ease.
Mexico announced a pretty big tariff deal with the US today. That’s bullish and could increase economic activity.
We don’t know.
I maintain that increases in tariffs act like taxes. They slow down things and are not inflationary.
One friend pinged me saying they absolutely should stay on the current course. He hates the Fed, and hates the way our government operates. Another pinged me with this:
M3 for the United States was 20767400000000.00000 National Currency in November of 2023, according to the United States Federal Reserve. Historically, M3 for the United States reached a record high of 21703600000000.00000 in July of 2022 and a record low of 298200000000.00000 in January of 1960. Trading Economics provides the current actual value, an historical data chart and related indicators for M3 for the United States - last updated from the United States Federal Reserve on July of 2025.
M3 money supply has been dropping, but has sort of stabilized. It makes sense that it is dropping from the Covid/Biden spending blowouts. But, drops in M3 sometimes signal recession is on the horizon. Of course, that would lend credence to the “cut” sentiment.
I can see staying pat given the uncertainty of how the business community will respond to the various tariff deals. I can also see how we could ease. Brian Wesbury thinks we should ease.
James Fishback, CEO of Invest Azoria, makes a more strident case to ease:
I’ve watched every Fed press conference since they began in 2011. I spent a decade trading interest rate derivatives. Following the Fed was literally my full-time job. Yesterday was the most confusing, bizarre, and blatantly political Fed press conference I’ve ever seen. Jerome Powell keeps moving the goalposts from meeting to meeting to justify keeping rates at 20-year highs—the lower-than-expected inflation data be damned! Why? It looks like an effort to sabotage President Trump and his economic agenda. And real people are paying the price. Americans can't get a home because they can't afford a mortgage because Powell won't get off his anti-Trump high horse and lower rates like every single central bank in the West has this year. He's hurting workers, families, retirees, and businesses small and large. What Jerome Powell is doing is economically illiterate and deeply un-American.
Macroeconomics is the dismal science and always messy.
In other news, the smoking gun was just released by the Trump Administration that proves Obama was the ring leader behind the soft coup in 2016. People need to go to jail. But, the people who smoke Hopium and people with Trump Derangement Syndrome won’t look at data.
I'm going to channel my inner Ron Paul here but the Fed shouldn't be controlling interest rates in the first place. Leave it to the free market.
Money is a commodity and interest rates are the same as any other commodity price. They contain information about the relative scarcity of resources.
Of course the Fed is politicized. What did anyone expect would happen when the free market was replaced with letting powerful people direct the flow of trillions of dollars?
About your last paragraph: where it concerns the ‘Durham Annex,’ I will say two things:
1) Chicago Democrat Barack Obama; and,
2) Cook County Democrat Hillary Clinton.