It would not. It would supercharge spending, and as a result inflation, when inflation is already going to spike by 20% due to tariffs. It will completely distort housing and assets markets, and we will still go into a recession. However when the recession sets in, there will be nowhere for the fed to go to mitigate it.
Tariffs make things cost more dollars for the consumer.
Inflation makes the dollar less valuable for the consumer.
They have the same net result for the consumer, I suppose, reducing their buying power. But they are mechanically different in how they operate.
Lowering interest rates would give consumers access to cheaper borrowing to offset the tariff impact on their debt usage.
Would also pull cash out of high yeild accounts and bonds back into the economy and stock market. High yield accounts and bonds have been producing a safe ROI for a while now that contends with the SP500 avg ROI yoy. With very low/no risk...
And when those consumers exercise that cheaper borrowing, and more importantly the wealthy dip into cheaper debt with which to buy assets, overall consumer demand goes up.
Because of the tariffs, and trade wars, supply will go down.
Demand going up and supply going down at the same time means prices will increase rapidly.
Bonds have been contending with SP averages, but are at 1/5th of SP actuals over the last 2 years.
True true... I'm not saying the FED has an easy job. And fiscal tuning is complicated AF.
But... reduction of interest short term could ease the bleed if they need to bail out the stock market at a macro level. Not that they will, just that it could.
It would ease the bleed at first, but would trigger a series of dominoes that would make the crisis many times worse in six months if we didn't perfectly thread an invisible needle with invisible thread.
We are getting a recession either way. Going into a recession with low rates, low trade, high debt levels, after Trump printed 7 trillion 5 years ago and biden printed 2 trillion over the last 4 years. After we just got out of 2 years of very high inflation. In the middle of a housing price crisis.
We will have used all our tools at this point as hard as they can be used without breaking, right before the real crisis starts. So we would have nowhere to go. It would be a devastating depression akin to 1929. There would be nothing left in the toolbox.
It's how countries like Argentina went from world class economies to clown shows.
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u/CoughRock 1d ago
who's making these prediction for rate cut ? didn't jpowell explicitly said he's going to wait and see ?