At the start of August, we explained how - by scapegoating the global economy for the Fed's July 31 rate cut - the central bank had now trapped itself, having certified before the world that any further escalations in Trump's trade war are effectively a justification for more rate cuts. Whether this was Powell's intention is unclear, although as we said at the time, "it certainly means that Trump is now de facto in charge of the Fed's monetary policy by way of US foreign policy, and it also means that as BofA wrote, "the Fed is unintentionally underwriting the trade war."
As we noted at the time, this meant that "the Fed may very well be intentionally underwriting Trump's trade war." In either case, as Bank of America's chief economist Michelle Meyer said, such a circular framework is a problem for many reasons, and as the bank admited, there is a risk of an adverse feedback loop where the trade war hinders economic growth, therefore prompting additional Fed easing, which in turn allows for greater trade war escalation. This is shown in the chart below.
More
DelMarVa's Premier Source for News, Opinion, Analysis, and Human Interest Contact Publisher Joe Albero at alberobutzo@wmconnect.com or 410-430-5349
Hasn't the fed always been reactive/proactive to world events? Which mean major actions of any US president would have an impact on their rate decisions. Another nothing burger story meant to get clicks.
ReplyDeleteHe's been doing it. EVERY time the economy gets going. He puts his foot out and Trip's it. Now he's got it on the ground and won't let it up. Way too MANY corrupt people in this country. Need a much smaller government at ALL COSTS!!
ReplyDeleteEND THE FED!
ReplyDeleteDo not trust the FED its uneleteced illegal federal pay loan outlet..its really the luciferians slush fund scam
ReplyDeleteTrump is playing games and destroying our economy. making the rich richer, and poor poorer. Yes indeed the fed is needed. And to stick it to Trump by doing the right thing.
ReplyDeleteIf Interest rates get low enough, people are going to again be borrowing money and putting it in the stock market.
We already have an out of control president putting tariffs on everyone. Just like what was done in the 20's. When a 20 percent tariff was put on all goods coming in.
Read up on your history. Trump is doing many of the things that lead up to the stock market crash in 1929 and the depression.
Trump has to go. I voted for him. He's cost my family and I a great deal. No tax break, we have just gotten poorer and more stressed.. Never again. I'll take all the freebies the Dems want to give us at our ages.