Interest rates not budging, Fed to focus on inflation not stimulus: CEI analysis

The Federal Reserve announced today that they are holding steady on interest rates in a continued effort to combat inflation. CEI senior economist Ryan Young says that the Fed should continue to act independently of political pressure.

“As expected, the Federal Reserve held interest rates steady. Today’s better-than-expected GDP news gives the Fed room to focus on inflation, rather than economic stimulus.

“There were two dissents in the 12-person vote, which by longstanding custom is usually unanimous. It was the first vote with two dissents since 1993. Both dissenters were Trump appointees. One of them, Christopher Waller, is a potential successor to Fed Chair Jerome Powell. The dissenters’ votes may have been signals about loyalty to the president.

“While President Trump will make his displeasure known, he will likely not fire Powell. Financial markets would revolt, and Powell’s term expires next year anyway. Instead, look for the president to chip away at the Fed’s independence at the margins. His pressure campaign over the Fed’s renovation cost overruns is one example.

“The Fed might consider a rate cut at its next meeting in six weeks. If it does, the country will be better served if the decision is the Fed’s own, rather than the president’s. Who makes the decision is far more important than the decision itself.”