Interest rates in US, your take

[paxmao]

Trump has been lately calling repeatedly Jerome Powel, chair of the fed, Mr. Too Slow.

And from his point of view this is true. Ideally, Trump would need the lifeline of an interest rate cut - that would help many people with debt in the US and the business in general - not to mention the battered stock markets.

However, JP seems to think that there is no hurry in lowering the rate, since the economy is working well and there is no risk to employment at the moment.

The underliying issue seems to be if tariffs will be inflationary (despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US). There may be long term gain, but the short term Pain seems guaranteed.

Another problem is the level of investment in the US. Trump is also saying that he is on a tour to get the rich of the world investing in the US. If that is just marketing or real, the fact is that some companies will invest in the US - which means more money into the economy, which means... inflationary pressure.

How will this play out? Will inflation be contained, rates lowered? Could we be heading for stagflation? Is the future pinkish?

[Oshosondy]

The underliying issue seems to be if tariffs will be inflationary (despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US). There may be long term gain, but the short term gain seems guaranteed.

If Trump continues his tariff plans the way he was doing it that time and the price of the goods from the countries increase, local sellers may increase other prices also if there is no price control, it may result in inflation.

Another problem is the level of investment in the US. Trump is also saying that he is on a tour to get the rich of the world investing in the US. If that is just marketing or real, the fact is that some companies will invest in the US - which means more money into the economy, which means... inflationary pressure.

More money with more production will not result in inflation. Also printing of money with more production will not result in inflation. Bit if there is no higher production, it is inflation.

[pooya87]

Economy has been increasingly harder to predict in the past 3 years that the world has been getting more destabilized. Trump's flip flopping policies have made things even less predictable since he alone destabilizes everything with his actions and decisions that keep changing!

All of that leads to more inflation which is palpable when people look at the bills they pay (groceries, rent, etc.) which is the reason why interest rates aren't coming down.
Now with 30% tariffs on most Chinese imports which is a high rate, and various heavy restrictions on other imports from China (using fentanyl as an excuse), and high tariffs on a lot of other countries, that inflation is going to grow making rate cuts that much harder.

[Zlantann]

How will this play out? Will inflation be contained, rates lowered? Could we be heading for stagflation? Is the future pinkish?

Donald Trump's tarriff war created so much uncertainties. Each day the US government was coming up with increase in tarrif and the FEDs need to be cautious about cutting interest rate. With several tariff deals reached with several countries, I think the coast is now clear for the FEDs to reduce interest rates if the economic conditions are favorable for such a move.

If Trump continues his tariff plans the way he was doing it that time and the price of the goods from the countries increase, local sellers may increase other prices also if there is no price control, it may result in inflation.

And this will force Jerome Powell to maintain the current interest rates or even increase them in the future. A cut in interest rate usually leads to an increase in the price of Bitcoin. I guess many crypto industry players will want to see future cuts in interest rates.

[el kaka22]

Honestly, I can with honesty in my heart, make a case for both. If the rates are cut, more debts will be paid, more loans will be taken, those loans will grow business, that means more jobs, and economy will flourish and do so much better.

But at the same time, I can do the opposite, if rates are cut, then inflation increases, and recession will start, and that will ruin the economy. Remember, with low rates, savings becomes less, and that means, more money on the market, that means, money is less valuable, that means, more money needed to buy the same thing, that means inflation, that means bad economy. See how easy it is to make a case for both sides?

[Fortify]

Trump has been lately calling repeatedly Jerome Powel, chair of the fed, Mr. Too Slow.

And from his point of view this is true. Ideally, Trump would need the lifeline of an interest rate cut - that would help many people with debt in the US and the business in general - not to mention the battered stock markets.

However, JP seems to think that there is no hurry in lowering the rate, since the economy is working well and there is no risk to employment at the moment.

The underliying issue seems to be if tariffs will be inflationary (despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US). There may be long term gain, but the short term gain seems guaranteed.

Another problem is the level of investment in the US. Trump is also saying that he is on a tour to get the rich of the world investing in the US. If that is just marketing or real, the fact is that some companies will invest in the US - which means more money into the economy, which means... inflationary pressure.

How will this play out? Will inflation be contained, rates lowered? Could we be heading for stagflation? Is the future pinkish?

The central bank is meant to be independent of politics and it only creates more uncertainty for the US economy when a weak president decides to attack the head of the central bank. Just look at the state that Turkey got into when Erdogan started pulling the same moves, thinking he was some master economic strategist, but in actual fact being an egotistical meddler that caused inflation to shoot up, they are only just now creeping back to normal. Trump is the whole cause of economic trouble in the USA right now, because businesses need stability and clarity in order to plan for the future, things like throwing up tariffs just create barriers to trade and wipe out some fragile business models - look at supermarkets that make margins like 2-3% on their products - all additional costs that are charged to the American consumer are immediately passed on in this scenario.

[WillyAp]

Honestly, I can with honesty in my heart, make a case for both. If the rates are cut, more debts will be paid, more loans will be taken, those loans will grow business, that means more jobs, and economy will flourish and do so much better.

What makes a country thrive is lower and middle class having bundles of spare money.
Businesses having money don't buy food, fruits, electro domestics, washing machines, cars etc..
In almost all economical data that does not play a role. None whatsoever.     

[DeathAngel]

I think we are headed for stagflation. Canada is cutting rates, the UK is cutting rates, the EU is cutting rates. Powell is definitely Mr Too Slow although he didn’t mind cutting 0.50% to try & help The Democrats just before the election. Powell is listed as a Republican but I think he has big beef with Trump & this is politically motivated. I feel like he is in some stupid personal battle with Trump.

[Agbamoni]

Economy has been increasingly harder to predict in the past 3 years that the world has been getting more destabilized. Trump's flip flopping policies have made things even less predictable since he alone destabilizes everything with his actions and decisions that keep changing!

I agree with you Pooya87, a destabilized economy is a dead one in the making. When there is no consistency in policy, a defined direction and constant tariffs drama, the economy will suffer in the ways that aren't always immediately visible, but they get worse over time.

If Trump polices continues to push toward instability, sooner or later it will get to the extent where recovery wont be easy, or may not be possible at all. An econmy take years to build strong, but only months to cripple; this is exactly what the Trump regime has shown me. Think about it, when investors lose confidence in a country’s stability, they move their money elsewhere.

[paxmao]

Economy has been increasingly harder to predict in the past 3 years that the world has been getting more destabilized. Trump's flip flopping policies have made things even less predictable since he alone destabilizes everything with his actions and decisions that keep changing!

I agree with you Pooya87, a destabilized economy is a dead one in the making. When there is no consistency in policy, a defined direction and constant tariffs drama, the economy will suffer in the ways that aren't always immediately visible, but they get worse over time.

If Trump polices continues to push toward instability, sooner or later it will get to the extent where recovery wont be easy, or may not be possible at all. An econmy take years to build strong, but only months to cripple; this is exactly what the Trump regime has shown me. Think about it, when investors lose confidence in a country’s stability, they move their money elsewhere.

I do not think that economy has been more or less difficult to predict that in the past, I mean as average. There are always elections that make a difference, there are always wars, the COVID or whatever... Perhaps the good thing about the economy is that it is always difficult to predict and that is what creates opportunities.

I think that some people profited well from Trump's wild style.

[takuma sato]

There's some people that claims that the FED is doing a controlled demolition sort of operation here in which they just want to leave interest rates higher long enough to create a recession which would be manufactured. I don't believe in this, this is too tinfoil hat-ish for my taste; I believe it's just Jerome Powell trying to not rush cutting rates because they legitimately expect some sort of inflationary event from the tariffs. They may think that the current tariff levels are still not priced in within the economy. Even after the 145 to 30% decrease on China, 30% is still a tariff, so China may not end up finding a deal within 90 days and they may even retaliate and raise the tariffs on the US. I think Jerome is too paranoid to act, and they are going to be stuck on the current interest rate, or very slowly lower and see the reaction. Of course, they may end up creating the recession and they may end up panic cutting again into a market crash, but that I believe wouldn't be some sort of planned thing.

[pooya87]

Economy has been increasingly harder to predict in the past 3 years that the world has been getting more destabilized. Trump's flip flopping policies have made things even less predictable since he alone destabilizes everything with his actions and decisions that keep changing!

I agree with you Pooya87, a destabilized economy is a dead one in the making. When there is no consistency in policy, a defined direction and constant tariffs drama, the economy will suffer in the ways that aren't always immediately visible, but they get worse over time.

If Trump polices continues to push toward instability, sooner or later it will get to the extent where recovery wont be easy, or may not be possible at all. An econmy take years to build strong, but only months to cripple; this is exactly what the Trump regime has shown me. Think about it, when investors lose confidence in a country’s stability, they move their money elsewhere.

I do not think that economy has been more or less difficult to predict that in the past, I mean as average. There are always elections that make a difference, there are always wars, the COVID or whatever... Perhaps the good thing about the economy is that it is always difficult to predict and that is what creates opportunities.

I think that some people profited well from Trump's wild style.

Some people being the inner circle are definitely benefiting from Trump's chaos but the uncertainty in the economy is definitely causing severe damage. It can be clearly seen in the amount of capital the investors have been consistently pulling out of America over the past couple of months.

[Synchronice]

The underliying issue seems to be if tariffs will be inflationary (despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US). There may be long term gain, but the short term Pain seems guaranteed.

Customers will pay, that's guaranteed, most likely is a wrong word here. Big companies have low profit margins but high quantity. If company makes 10% net profit from one sold product and Trump sets 40% tariff, then how the hell does Trump think that companies will pay for it? The company might pay for 1% difference but for two digits? There is no chance, they won't sell product with lower price than they spend to produce.

Another problem is the level of investment in the US. Trump is also saying that he is on a tour to get the rich of the world investing in the US.

To be honest, it's funny that the president of the USA, which is a number one economy in the world, is going on tours to attract new investors. I think that his new tariffs will worsen this process because the US showed that it's not a reliable partner. I wouldn't be surprised if one day Trump decides to take businesses from foreigners and make them the property of the United States.

[Coyster]

I think that some people profited well from Trump's wild style.

The wild style can only favor a few who are prolly on the inside, Trump's style is filled with uncertainty, people don't know if they should buy or sell assets, and what's worse is that when the U.S. stock market is down, weak hands start selling bitcoin, and the price of bitcoin falls too. I don't know for how long trump can keep up with this wild/uncertain style, but i reckon that it can't be for so long because of the negative impact on the economy.

[yudi09]

-snip-

How will this play out? Will inflation be contained, rates lowered? Could we be heading for stagflation? Is the future pinkish?

The global economic situation is not well experienced by various countries including America. Nevertheless, with full awareness, those who have the power and policy continue to strive to overcome the complexities that cause it. Developing countries around the world are no exception.

The establishment of reciprocal tariffs that occurred suddenly, then suspended the decision until it continued with the contents of the agreement in Geneva and now Trump's efforts to attract investors to be willing to invest in America are efforts that are being made to become an economic solution that is not as usual.
Many heads of state are also negotiating with wealthy investors.

From my point of view, there is no narrative that can truly reflect a solution other than hoping that the economy will return to health considering that it is quite difficult for the people in terms of struggling to make money.

[Lida93]

The underliying issue seems to be if tariffs will be inflationary (despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US). There may be long term gain, but the short term gain seems guaranteed.

If Trump continues his tariff plans the way he was doing it that time and the price of the goods from the countries increase, local sellers may increase other prices also if there is no price control, it may result in inflation.

Price control mechanism may not actually work as marketers will be forced to defy any given price should the tariff increase resurface again in the way it got started by trump by the end of the 90 days pause. No businessman wants to be in loss.

Freight bookings out of China increased nearly 300% this week compared to the week earlier, soaring to the highest levels of the year.. If not for uncertainty about what may happen after the 90 days tarrif pause, what could have led to this shipments surge as the 90 days draws closer.

[WillyAp]

Freight bookings out of China increased nearly 300% this week compared to the week earlier, soaring to the highest levels of the year.. If not for uncertainty about what may happen after the 90 days tarrif pause, what could have led to this shipments surge as the 90 days draws closer.

A quick buck moves a lot of people.
Ups and downs are a dream scenario for trading.

[takuma sato]

I think that some people profited well from Trump's wild style.

The wild style can only favor a few who are prolly on the inside, Trump's style is filled with uncertainty, people don't know if they should buy or sell assets, and what's worse is that when the U.S. stock market is down, weak hands start selling bitcoin, and the price of bitcoin falls too. I don't know for how long trump can keep up with this wild/uncertain style, but i reckon that it can't be for so long because of the negative impact on the economy.

Everytime Trump uses the tariff card, the tariff card becomes increasingly weak because he has already shown he will fold. So the more he threatens with tariffs, the less impact it will have on the market. That big crash on the SP500 and other major indexes where it re-tested the weekly 200 day moving average was probably peak fear for tariffs, it would take something else to go below that, possibly a proper recession, some things breaking appart, as of right now, Trump has to start making deals because investors and businesses will not believe them. Companies in other countries may not return to the US because they know they just have to temporarily resist and then Trump will lower the tariffs, and investors may not dump as much stock because they know it's temporary, which is good on the investing side of things, but not for the companies actually returning to US soil due tariffs threats, since as we have seem it's just a bluff. The uncertainty countinues since this is a 90 day pause on the war. Powell is considering these things and doesn't want to rush lowering rates. We will see how the bond market reacts, the bond market could force Powell to lower rates if it goes low enough, assuming the theory of the US10Y being a big indication of what FFR will do is.

[criptoevangelista]

I think Donald Trump is pushing it a bit and using this as marketing to boost his popularity, since lower rates stimulate consumption and give a false sense of prosperity. I believe the Fed chairman is doing what needs to be done. We’re still feeling the financial impact caused by the pandemic. Interest rates will come down sooner or later, but any rate cut needs to be done responsibly.

[Sonia_123]

Donald Trump Criticizes Jerome Powell, Urges Fed Rate Cuts
Donald Trump has fired shots at Jerome Powell, branding the Fed Chair a latecomer over delays over interest rate cuts.
https://coingape.com/donald-trump-criticizes-jerome-powell-urges-fed-rate-cuts/
Donald Trump has criticized Jerome Powell for indecision toward rate cuts.
Recent US economic data indicates slowing inflation amid calls for interest cuts.
However, the Fed is opting for a cautious approach amid Trump's global tariff wars.