This image is definitely one of my finest creations if I do say so myself.
At 4.25%-4.5%, the Federal Funds Effective Rate exceeds the 2.4% CPI inflation rate by a wide margin. This gaping 2% dissonance shows the Fed’s death grip on their mission to curb inflation. They may be dead right, but you can’t do much good if you’re dead. It’s a noble war they have undertaken and inflation has been easing despite tariffs putting upward pressure on most everything (which to be fair may not show up in the data for a few more months). Declining inflation should lead to lower rates and consequently reduced borrowing costs naturally, but The Donald is petitioning the Supreme Court to see it his way and oust Jerome ASAP. “Throw in the towel, Powell”, and make America Great again. Now that would make a great tweet. Man, I’m on a roll!
The takeaway: As inflation continues to decline, interest rates are expected to follow. But the President feels he’s not willing to wait for the independent Open Market Committee to eventually take action. As an aside, I have probably seen “Hamilton” a half dozen times and Mr. Powell would do well to learn that duels never end well for the finance guy, especially if the opponent has something to prove.
