Think carefully. I will grade your answer.
The current odds suggest only a 30 percent chance the Fed will cut rates by a half-point on September 18.
I believe those odds are very understated because I think the next CPI report will be very Fed friendly. I will write that up shortly.
Meanwhile, the question is how should Trump react if the Fed were to cut by that much, not what Trump will do.
When Will We Know?
We will not have a firm grasp until Wednesday September 11 (CPI report). The Fed meets a week later.
My guess is the combination of last Friday’s jobs report plus the CPI report will allow the Fed to cut by 50 basis points if it wants to.
Self-Grading the Answers (depending on precise reasoning)
- Rejoice: B+ minimum to A+
- Complain: F to C
- Neither: F to C
- Both: B- minimum to A+
Rejoice Discussion
Those who said Rejoice have the right idea. Trump should privately rejoice. A deteriorating economy rates to benefit Trump. Those who rejected both only because they believe complaining is counterproductive get an A.
Whether complaining will add or subtract depends on how loudly and in what ways Trump does that. Complaining could very well be negative. Full A+ credit for those who fully understood the nuances.
Both Discussion
Those who said Both for the right reason get an A. The right reason is Trump should privately rejoice at an economy that is deteriorating badly enough to allow the Fed to cut that much. Those who think complaining will help, get grade A-. Those who think complaining will help if done properly get an A+. Those who think complaining is the bigger idea get a B-.
At the time I wrote the question, I thought Both was the correct answer. But upon reflection there are a couple problems with both. First, Trump is likely to overreact. Second, this economy is deteriorating rapid and Trump, if elected, will be calling on the Fed to cut if he wins. So why should trump moan now and then beg for cuts later?
Full credit if you thought about all of that and voted Both anyway. This is about what Trump should do. I have no problem with complain mildly (if it helps election chances) but it will make him look silly later when he changes his tune.
Complain Discussion
Complain has all of the problems of both but none of the recognition that Trump should be privately pleased about the economic realities.
A deteriorating economy rates to benefit trump. Those who said complain seem to have missed the key idea or ignored it.
For those who firmly believe the Fed should not cut at all, OK why?
There should not be a Fed at all. But if that’s the reason, Trump sure hasn’t been saying so.
Trump ridiculously stated that he could do a better job than the Fed. That is dangerously stupid. One thing worse than a Fed is putting politicians in charge of interest rates.
Neither Discussion
Neither is a bit confusing. But a deteriorating economy rates to benefit trump. At a minimum Trump should privately be happy.
Apply the above paragraphs and rate yourself.
Interesting Exchange
Without reservation, I agree that the Fed will not impact the election. It’s too late.
I also agree that Trump will complain even if the Fed only cuts by a quarter point.
However, the reason the Fed would cut by 50 points certainly does matter.
The Fed is very aware of the politics. It the Fed cuts by 50 points the underlying economic fundamentals will likely be poor and deteriorating.
The Fed is well aware of the lags and the potential for complaints in both directions. If the Fed only cuts 25 basis points and the economy crumbles, Democrats will be moaning.
Powell is in a no-win situation.
It takes time for rate cuts to work, but time has expired. It’s too late for cuts to save the economy. So Trump should welcome a half-point cut (privately).
A half-point cut is all but admission that a recession has started. It may even spook the market, further helping Trump.
BLS Negative Job Revisions 15 of Last 21 Months
For further economic discussion, please see BLS Negative Job Revisions 15 of Last 21 Months
I recap a slew of indicators all screaming one thing: Recession.