Hot on the heels of the rather significant rebound made in the stock market on Monday, right smack in the middle of a growing confidence that major banks are going to cut interest rates, the Federal Reserve — enemy to both conservatives and libertarians alike — decided to go ahead and break out the metaphorical machete and hack away at the rate itself, dropping it by 0.5 percent.
This is the biggest cut to the interest rate since the 2008 financial crisis that was the result of the housing bubble bursting wide open.
President Trump has been squeezing tight on the Fed, calling on it to take “big” action. The president said that this cut still wasn’t enough.
Here’s more from The Daily Wire:
“We saw a risk to the outlook of the economy and we chose to act,” Federal Reserve Chair Jerome Powell said at a press conference Tuesday, as reported by The Washington Post.
In a statement Tuesday, the Fed indicated that it may take further stimulus measures if necessary. “The committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy,” read the statement, as reported by the Wall Street Journal.
“The Fed’s action reduces the U.S. interest rate to just below 1.25 percent, down from 1.75 percent,” the Post explains. “Fed leaders voted unanimously in favor of the rate reduction, and Powell tried to project a sense of calm during short 13-minute press conference. He said repeatedly that the U.S. economic fundamentals still look healthy, but he said ‘sentiment’ had shifted.”
The Journal also underscores the unusual nature of the Fed’s actions. “Tuesday’s cut, which lowered the federal-funds rate to a range between 1% and 1.25%, is the first to occur in between a scheduled policy meeting since the 2008 financial crisis,” the Journal notes.
Trump has been piling the pressure on Powell to take a cue from other countries who have taken a butcher knife to their interest rates, specific examples being Germany and Australia. The impact of those reductions, combined with the hopeful attitude that other major banks would also follow suit, resulted in the strongest positive movement for the stock market in over a decade.
Trump weighed in on the Fed during a series of tweets, slamming Powell on this issue.
“As usual, Jay Powell and the Federal Reserve are slow to act,” Trump tweeted out. “Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate. We don’t, putting us at a competitive disadvantage. We should be leading, not following!”
“Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown,” Trump went on to say. “They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so. Our Federal Reserve has us paying higher rates than many others, when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!”
The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!
— Donald J. Trump (@realDonaldTrump) March 3, 2020
The Federal Reserve has been a problem for quite some time, which is why Trump is hammering on them so mercilessly. The president is correct about the United States being an economic leader by having the lowest rates. That’s exactly the place we should be in, with lower taxation and folks actually able to keep the money they sweat to earn.
Here’s to hoping his continued pressure leads to results that will benefit Americans and amplify our standing with other countries.