[The Soup Nazi]

2/2

And at this point we have to talk about politics. If and when the Fed finally does cut, you know that it will be fiercely attacked by Donald Trump and his allies for conspiring to re-elect President Biden; after all, that’s what they wanted the Fed to do on their behalf before the last election. I don’t think that’s weighing on the Fed yet, but as the election approaches I fear that it will.

So let’s be clear: This would be a really bad time for the Fed to give in to political pressure from the right. It shouldn’t do so in any case, but especially not now, when it’s clear that any attempt to appease MAGA types would be futile. If Trump’s forces are victorious, the Fed (along with many other U.S. institutions) will quickly lose its independence; a former Trump aide, Peter Navarro, interviewed in prison, recently declared that if Trump wins, Jerome Powell, the Fed chair, will be gone within 100 days.

I understand that Fed officials can’t talk about these political considerations. But I hope they’re aware of them.

If it were up to me, I’d make a small rate cut next month. The Fed, spooked by those probably misleading inflation numbers, seems likely to wait at least until July, while more numbers come in. But I really, really hope that it doesn’t wait any longer. We cannot afford a case of Fed inflation brain.


Quick Hits

Does inflation just mean high prices? I have doubts.

Wage growth may be down to prepandemic levels.

Would Trump make inflation great again?

People aren’t talking enough about the disastrous implications of Trump’s plan for mass deportations.