Fed Rate Cut Opinions: Right, Wrong, or neither?
I'm currently of the opinion that this rate cut is ineffective at dealing with the ongoing trade war with China and increasing tariffs across the world. Trump is using fed rate cuts as ammunition in his trade war, and the end result will be 1970s style stagflation if the fed continues to cut the fed funds rate as a response to tariffs. The fed's policy tools are a blunt instruments that are best suited to dealing with aggregate demand shocks in the economy. Increasing tariffs are a short-run aggregate supply shock. The fed is helping GDP in the short run, but is essentially piling on inflationary pressure considering that tariffs also increase the overall price level.
I want to get as many other opinions on this as possible. It seems like the Fed is between a rock and a hard place as neither cuts nor increases can effectively provide price stability and keep unemployment low in response to tariffs.
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