8/02/2019

Powell Is Giving Trump His Rate Cut, Here is Why It's a Mistake

"If there is something that is evident, it is that the United States does not need a rate cut.

With the economy growing at 2.1%, unemployment at 3.6%, creating 170,000 jobs per month, and estimated underlying core inflation of 2%, no objective data justifies cutting rates that are already artificially low. Wages are rising by 3% and credit growth for companies and families is solid.

There is also no public sector financing problem. The 10-year US bond trades at a 2.05% yield, consistent with the country’s growth and inflation. In real terms, the United States borrows at almost no cost and without Federal Reserve support, as all bond demand comes from the secondary market."