Posted on 04/26/2019 8:25:49 AM PDT by SeekAndFind
The U.S. economy is off to its best start to a year since 2015 and White House economic adviser Larry Kudlow says Federal Reserve should still add stimulus by cutting interest rates.
GDP grew by 3.2% in the first quarter, which Kudlow called “a blow out number.” He said the current economy is in a “prosperity cycle” that “is gaining momentum, not losing momentum”
“The inflation rate continues to slip lower and lower,” Kudlow told CNBC’s “Squawk on the Street” on Friday. “Even according to the Fed’s own spokespeople, from the chairman on down, that could open the door to a target rate reduction.”
Kudlow, director of President Donald Trump’s National Economic Council, said the argument for cutting interest rates was coming by the Fed’s own metrics.
“We are clicking on all cylinders, the inflation rate is coming down, the Federal Reserve will be looking at that,” Kudlow said.
Kudlow has advocated this view ever since Fed Chairman Jerome Powell said at the central bank’s March meeting that no rate cuts would be necessary this year. Both Kudlow and Trump have been outspoken that they think the Fed should stop shrinking its balance sheet and cut rates.
(Excerpt) Read more at cnbc.com ...
If it ain’t broke....don’t fix it. Let it ride!!
1. If they cut rates when the economy is running well, what do they do when things slow down?
2. Aren't rates being effectively cut anyway? Mortgages and consumer loans tied to U.S. Treasury rates actually DECLINED even while the Fed was raising its Federal Funds rate in late 2018.
The U.S. economy is off to its best start to a year since 2015 and White House economic adviser Larry Kudlow says Federal Reserve should still add stimulus by cutting interest rates.
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Kudlow is right.
The yield curve is flat, which means the Fed has erected an artificial impediment to economic growth, so I would not call lowering rates stimulus, but would say it’s undoing the Fed’s wrongheaded manipulation.
Furthermore, economic growth does not cause inflation. The Fed should abandon their fake claim that it does.
They want to make sure the Fed’s attempts to undermine Trump don’t succeed by putting the brakes on the economy before November 2020.
Kind of silly logic we’ve been operating on (when it’s not someone like Obama in office) with: We need to put the brakes on the economy now so we can take them off after we grind it to a halt.
1. If they cut rates when the economy is running well, what do they do when things slow down?
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The economy is already slowing down.
If the Fed doesn’t artificially cause a recession like they usually do, then they won’t need to lower rates.
But if there were some type of financial emergency, tax cuts would be a better stimulus, anyway.
2. Aren’t rates being effectively cut anyway? Mortgages and consumer loans tied to U.S. Treasury rates actually DECLINED even while the Fed was raising its Federal Funds rate in late 2018.
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But the Prime Rate has gone up quite a bit on a percentage basis.
The Fed causing recessions by raising interest rates, and then stimulating the economy by lowering interest rates is what causes inflation, not economic growth.
I’m sure many of the elites would love for the Fed to destroy the economy before the 2020 elections, but they are just doing the same interest rate meddling they’ve done for decades.
First of all Larry, inflation is not as low as the reported numbers. We all know that.
Second, there are other factors to consider like the dollar, the fact that individual savers and institutions (insurance companies and pension funds) depend on a safe and reasonable rate of return on their savings and/or investments, and some kind of buffer for when (not if) a recession hits.
Larry is sounding like he advocates a centrally planned economy. Hope he’s not back on the sauce or blow.
You are correct. Cutting rates would lead to a more normal yield curve. The Fed raised too soon and this recovery, as robust as it is, is still fragile.
We are in uncharted territory as far as interest rates go. The past decade was a depression by all accounts. It was compounded by Obama’s assault on our economy.
Kudos to Kudlow for pushing for this and being a stalwart Trump supporter. He’s a sharp as anyone when it comes to macro economics.
Inflation is at 2.5%. Lower interest rates. It’s that simple.
By “shrinking the balance sheet” I assume they mean unwinding the 4.5 trillion in government bonds they own. The Fed bought them during the QE Obama years. They will have to be dealt with sometime.
They just have to let them mature and roll off the balance sheet. We could be Japan, I guess, and own 99% of the debt and 40% of the equities.
Or maybe China. They own 400% of the debt.
A. population growth.
B. productivity growth.
Over the last couple of decades our GDP growth has been hampered by constraints on productivity growth -- even with interest rates at all-time low levels. The solution Kudlow is proposing doesn't do anything to fix this problem.
The solution Kudlow is proposing doesn’t do anything to fix this problem.
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But the Fed arbitrarily raising interest rates hurts economic productivity. So if the Fed follows Kudlow’s advice that will help productivity.
I’ve always liked Kudlow. He’s a very smart man.
He operates in the theoretical and the practical world better than anybody.
He may have theoretical differences with President Trump, but he’s doing his job and pushing his boss’s agenda.
If inflation is 2%, no need to raise rates.
Inflation is at 2.5%. Lower interest rates. It’s that simple.
This is all that needs to be said.
CNN was surprised that the economy grew in spite of the GOVERNMENTAL shutdown...
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