EJ Antoni, chief economist at the Heritage Foundation, explains why the Fed has been behind the curve in managing monetary policy.
This page The Federal Reserve is set to announce its next interest rate decision on Wednesday and the monetary policy meeting comes as the economy grapples with a struggling labor market and rising inflation.
More conservative policymakers are expected to cut the benchmark Federal Funds rate by 25 basis points, lowering the target to 3.75% to 4%. The expected cut comes after the Fed cut rates by that amount at their September meeting. Markets are also expecting another rate cut at the Fed’s next meeting in December.
| It’s teasing | Security | – Last | Answer | change % |
|---|---|---|---|---|
| I: DJI | Dow jones averages | 47207.12 | +472.51 |
+ 1.01% |
| SP500 | IS & P 500 | 6791.69 | +53.25 |
+ 0.79% |
| I: comp | Nasdaq Composite Index | 23204.866975 | +263.07 |
+ 1.15% |
The Dow Jones Industrial Average, the NASDAQ Composite and the S&P 500 are all sitting at record highs. The DOW closed above 47,000 for the first time on Friday.
Dow jones general industries
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The latest inflation data From September released on Friday shows that the consumer price index (CPI) released up to 3% last year. The ongoing government shutdown delayed the September Jobs report, although data released over the summer showed a decline in hiring back this spring.
Ryan Young, senior economist at competitive business, told FOX Business that “Three percent inflation is high enough to raise prices closer to the 2% Target.”
Inflation remained above the Fed’s target in September before the decision to cut the rate
Markets expect that Fed Chair Jerome Powell and FOMC policymakers will cut rates by 25 basis points this week. (Kent Nishimura/Getty Images/Getty Images)
“This time around, there are warning signs all around the economy, from job performance to the seven months heading into the manufacturing index because of taxes,” said the younger. “That’s what’s pushing launch officials to cut prices. But that stimulus comes with a trade-off: It risks higher inflation. They’re taking a chance, and they might not pay.”
Lowering interest rates to support Labor Market – Apart from the risk of re-inflation – it can affect the use of Federal money. The $38 trillion national budget includes $1 trillion in the fiscal year ending in late September.
EJ Antoni, senior economist at the Heritage Foundation, noted in an interview with FOX Business that the currency rates are rising. The National Debt cause the Treasury to continue issuing short-term debt, rather than extending the term at lower rates.
“Part of the problem we’re facing right now is that debt issuance is very large, it tends to be very dependent on short-term debt,” Antoni explained. “The reason the finance secretary has to do that is because prices haven’t come down yet.”
Powell’s Fedell points to labor market weakness that persists as an escape from a formal government shutdown
The Federal Reserve is facing challenges on both sides of its dual mandate of promoting stable rates and high activity. (Samuel Corum/Bloomberg via Getty Images/Getty Images)
“If you put it in those very long terms, now you’re stuck with high levels of demand for a very long time, so, basically we have to get rid of debt at some point in the near future,” Antoni said.
When interest rates were cut last September by 50 basis points to kick off the rate-cutting cycle, Treasury yields moved higher and exacerbated the debt-supply problem.
“Just because the Fed is going to move a certain interest rate in one place doesn’t mean you’re going to see a corresponding move in consumer interest rates or the level of assets,” Antoni said. “Let’s say we get a bunch of cuts to education, but then the conversation goes back to the spending spree and the government is just fine Borrowing Money give a fist. What’s going on? You will see the prices rise again. “
Fed minutes show policymakers remain concerned about inflation as they cut rate cuts
Former Governor Kevin Warsh is in the running to replace Jerome Powell. (Tierney Cross/Bloomberg via Getty Images/Getty Images)
Former Greater Federal Reserve Governor Kevin Warsh said in an interview on Fox Business ‘”Maria Bartiromo’s Wall Street“That the Fed has done a poor job of managing inflation expectations and that new leadership is needed.
“The reason most households, most businesses, think inflation is going to be in the 2% range is because that’s what Fender is introducing,” Warsh said. “I think there is a regime change at the Fed, until the new people who are running with a new effective framework, stick with their old mistakes.”
Warsh, considered targeted by the Trump Administrations the success of the Fed chair Jerome Powell When his term as chairman expired the following year, he added, “The real reason we’ve had progress in deflation is not because of the Federal Reserve, in my view, because of Maria. It’s because of the President’s policies.”
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“His policies have he strengthened the economy. His policies lowered prices. But unfortunately, the Fed is working at cross purposes with him. And I, indifferently, understand his concern,” added warsh.
