Writing in a recent op-ed for Fox Business Online, economic analyst and Former Deputy Director of the National Economic Council of the United States Larry Kudlow hammered Federal Reserve Chairman Jerome Powell for the 0.50% rate cut the Fed launched in mid-September of this year, saying that it was an obviously political decision.
Announcing the cut on September 18, as a reminder, the Fed said, “In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”
Justifying its decision on an economic basis, the Fed also said, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.”
Kudlow wasn’t buying it. Slamming the Fed in his article, Kudlow argued that far from being justified on the basis of the state of the economy, current economic numbers indicate that the decision, particularly given that the cut was 50 basis points rather than 25, as was expected, was political. He wrote, arguing as much:
The Fed is playing politics and that’s the subject of the riff. Almost every new economic number coming out of Washington shows just how political the Fed decision was to launch their 50 basis point jumbo-sized rate reduction in mid-September.
Then, after noting that the jobs market only looks so good because of the massive number of government jobs added, Kudlow noted that the CPI report isn’t all that great either, particularly given that even core inflation is much higher than it was supposed to be. Writing as much, Kudlow said:
Over the past 12 months, the topline CPI is up 2.4%, which is 20% higher than the Fed’s 2% target. Under the hood, so-called core inflation was 3.3%, which is 65% above the Fed’s 2% target and, while the Kamala Harris campaign blasted JD Vance for suggesting a dozen eggs costs $4 now — because they were really only $3.20 in August — that was still more than double from the Trump years.
Continuing, Mr. Kudlow explained that it is a serious question of why the Federal Reserve announced a huge cut just before the election, something that is unheard of. He wrote, “Why did the Fed launch its uber rate cut a little over six weeks before the election? That’s unheard of during a presidential cycle.”
And, giving his answer, Mr. Kudlow said that the reason for the large rate cut decision is that the Fed has decided to be “political” rather than impartial in this case. He said, “The Fed was being political. No matter what side of the aisle you’re on, an objective look at the numbers shows the Fed was being political.”
Featured image credit: By The White House – P20211122AS-0958, Public Domain, https://commons.wikimedia.org/w/index.php?curid=114898261
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