The ordinary worker’s main asset is the income stream from their job. Lower interest rates don’t necessarily help them. Nonetheless, that seems to be what the Fed will give us, if President Trump gets his way.
For some, it’s because they expect the Federal Reserve to cut interest rates and otherwise “stimulate” the economy. They believe it would drive stock and real estate prices higher.
Amid the drip-drip-drip, it’s easy to lose sight of the timeline. Bloomberg has a handy digest of Trump’s Federal Reserve comments. His first hit was almost a year ago: July 19, 2018. Anyway, six weeks after the December rate hike, the Fed made a remarkably convenient reversal. The committee was suddenly sure rates were high enough.
Last January—between those two FOMC meetings in which the Fed changed its mind—Powell had several contacts with Treasury Secretary Steven Mnuchin. Still, high officials have busy schedules. These probably weren’t social calls. Maybe somebody delivered Powell a, ahem, “message.” Now, it doesn’t seem to work that way. My friend Peter Boockvar succinctly explained why in one of his recent letters. The problem is that “easy money” stops working when it becomes normal, as it now is.
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