Prices are high due to corporate price-gouging.

Powell knows this and has been lying to keep interest rates up during a Dem administration.

That’s partly why the markets declined (before recovering on Friday).

Can you describe how Powell could be fired?

In any case, a Trump lackey at the Fed cutting rates during inflationary conditions would send the economy into recession just in time for the midterms.

Your comment about rates under Powell being at a “two decade high” is misleading, considering that during those two decades, there was a global financial crisis and a pandemic sending rates to record lows.

It would have been more accurate and honest to say rates under Powell were below the eight decade average.

Lower demand causes increased unemployment and lower GDP, which is the benchmark for a recession.

That’s why Powell and the Fed have been masterful in threading the needle on rates, so that the benefits of Bidenomics could be maximized for as long as possible.

your points are valid, but leave out some important effects.

the reason lower rates can trigger high inflation is because lower rates cut costs for consumers, who can then consume more (increased demand). companies can borrow more cheaply and can therefore expand to meet the demand.

because the market change is led by consumers willing to spend more, there is generally a market adjustment in the form of higher prices (increased inflation), especially if the supply side is slow to meet the increased demand.

this increased inflation does lower demand, but the effect is nearly always smaller than the original increase in demand caused by the lower borrowing costs.

this is why lower interest rates generally stimulate the economy but can lead to (usually slightly) higher inflation.


now, there are always exceptions. say the economy is already red-hot and the supply side really can't expand to meet the increased demand. well, then the extra spending money in consumers' hands just goes to raise prices, so then, yes, you have more inflation than usual and little increase in gdp.

conversely, if people completely lose confidence in the fed because they cut rates way too much, enough to trigger spiraling inflation, then yes, that effect could become larger than the original effect of increased demand. but in order for that to happen, there has to be a self-sustaining mechanism for inflation to spiral. that's hard to happen without a strong labor market that is capable of getting pay increases, and usually that means strong unions.

we definitely don't have strong unions these days, though there have been some gains under biden in terms of wage increases. that said, i really doubt that will continue under donnie.

all in all, i think we're likely to be in a relatively typical economy where the fed lowering interest rates too much would stimulate the economy (higher gdp), but with a certain amount of increased inflation.

if the higher inflation is neglected for long enough, then people will lose confidence in the fed, which *could* lead to the spiraling situation described above that could eventually lead to a recession. but i think it's more likely that we still have modest growth with high inflation.

Is likely to make changes to the economy not currently factored into any future rate changes. Higher for longer seems likely.

Powell.

The uncertainty with tariffs and irresponsible tax breaks will limit the amount of interest rate cuts I also suspect.

the market is currently reflecting what the fed is saying, which is the there will more likely than not be only one or even no cuts in 2025.

the fed is constantly revising its views based on the economic data, of course, so this may change. but most of donnie's proposals and likely actual policies are inflationary, and in the case of tariffs, massively so. if they look likely to pass in a way even close to matching his extreme rhetoric, this would trigger serious inflation that would make the post-pandemic inflation that biden/powell largely tamed a joke.

the fed would then unanimously support a series of rate increases. any cuts would be pouring gasoline on the fire.

the billionaires backing donnie are fine with washington looking like a circus, but they need to have confidence in the fed. if the fed triggers inflation or fails to fight inflation, a *lot* of republican bigwigs will be pissed.

it's the one area i don't think donnie can clown around with and get away with it.

Powell is just the chair, and just one of 12 votes as to the raising or lowering of interest rates.

Even if Musk himself were the Chairman, he could still be outvoted 11-1.

interest payments on the national debt … it now totals more than a a trillion a year …

https://www.forbes.com/sites/eriksherman/2024/05/30/the-us-sailed-past-1-t-quarterly-interest-on-the-public-debt/

When the government competes to lower the interest rate, it becomes another big problem

They think he'll keep doing essentially what Biden has done with the Fed.

I have no idea. My takeaway is that a lot of wealthy Americans voted for Trump hoping that he won't do most of what he says he'll do.