The Fed Tied Its Own Hands with Rate Cut Decision

On Wednesday’s broadcast of the Fox Business Network’s “Kudlow,” Breitbart News economics editor John Carney stated that the Federal Reserve should have waited until after the election to make rate cuts and that by announcing a cut of 50 basis points now, the Federal Reserve has locked itself into doing the same in November.

Carney said, “[T]hey absolutely should have waited until November. There’s no economic theory that tells you cutting in September will change the economic path of the country rather than waiting until the day after the election in November when they have their next meeting. The other danger of this 50 basis point cut is, what happens if Donald Trump is elected and they decide they want to do 25 in November? Guess what? It’ll look like they pumped the economy for Kamala and then decided to stop being as unrestrictive when Donald Trump got elected. So, they are actually locking themselves into a series of 50 basis points cuts, and they don’t even realize it. Powell said, this is no set path, don’t think that this is the new way forward. It is the new way forward, especially if Donald Trump wins in November, because they will not be able to say, oh, we thought big cuts were good under Kamala, but now we’ve got to dial that back under Trump. That’ll be politically explosive.”

Later, Carney added that the increases in the projections of long-term federal funds rate are a demonstration that “we have a bigger underlying inflation problem. That comes from the government overspending.”