REUTERS/Kevin Lamarque
Commerce Department data and record stock-market highs indicate the US economy is on a tear so far under President Donald Trump.
Yes, inflation is still a bit too high at 3% — but under Joe Biden, we had inflation two to three times that level.
And economic growth was much lower then, downright anemic compared to the near 4% we’ve seen over the past six months, as measured by the Atlanta Federal Reserve Bank.
Someone please tell Federal Reserve chief Jerome Powell the good news.
On Wednesday, Powell announced a modest quarter-point interest rate cut, lowering rates to a new range of 3.75% to 4% — the first time in nearly three years that the benchmark rate has dropped to so low a level.
It’s a decision that should add further energy to the US economy, but in his comments Powell sounded downright glum.
He described the economy as being in a period of “moderate growth,” wrongly stating that the United States is limping along at a 1.6% GDP growth rate, and that he expects sub-2% economic growth next year.
Talk about the tyranny of low expectations.
Powell remains hyper-critical of Trump’s trade policies, and said he expects “some significant inflation . . . from tariffs” that will show up “pretty soon.”
He’s only half-right at best.
Tariffs are taxes that reduce growth, and in isolation will spill into higher consumer prices. (Just look at what has happened to coffee prices due to tariffs of up to 50% on Brazilian and Colombian coffee beans.)
But Powell rarely if ever tells the world that Trump’s tax cuts, his cost-cutting deregulations, his “drill, baby, drill” energy strategies that have produced record low oil and gas, and his many productive trade deals have been economic boons.
These pro-growth policies all are disinflationary.
The biggest problem at the Fed is that, as Steve Forbes has correctly pointed out, Powell and his cadre of 300 PhD economists still believe that growth causes inflation.
Apparently, if we reduce the production of goods and services, their prices will go . . . down?
That’s a little like hoping the sun rises in the west.
The Fed needs an abrupt change of course.
It should always and everywhere defend the dollar and price stability through its interest rate policies and through its economic rhetoric.
This would help reverse the greenback’s slide against other currencies, and in turn reduce inflationary pressures.
The Fed should be cheerleading most of Trump’s supply-side and pro-America policies, while waving cautionary flags about the dangers of tariffs.
