Goss says Fed rate cut coming, the only question is how much

President Donald Trump’s assertion on Sunday that he has the power to take away the chairmanship of the Federal Reserve from Jerome Powell, though right now he has no intention to do so, may not have the desired effect.

“We’re a cantankerous bunch, us economists,” said Creighton University economist Ernie Goss. “It makes us go the other way. The President’s been wanting a Federal Reserve rate cut and I think he’s going to get it, but it makes it more
difficult to do that.”

It’s not common for the Fed to turn this quickly on rates.

“This will be the shortest time span between a rate increase, which was last December and a rate cut, which may be coming in July, that we’ve seen in many decades,” said Goss. “Perhaps the President was right last December when he was calling for a rate cut, rather than a rate increase.”

As a practical matter, if you’re looking for short-term cash, it could help.

“It makes loans cheaper,” said Goss. “Certainly on the short end. That would be loans like an automobile loan. It makes them cheaper. Individuals do take on more loans. It stimulates the economy. It tends to push up inflation. That’s a real key. The inflation rate has been below the Federal Reserve’s target.”

The only real debate is whether the rate cut will be the typical quarter of a percent, or if the Fed will be drastic and cut a
half percent all at once.