00:00The Federal Reserve is expected to announce the first interest rate cut of 2025.
00:07The Fed is expected to cut rates by a quarter point Wednesday.
00:12It comes at a time of rising inflation and a slowing labor market,
00:16but also amid a push from President Trump.
00:19The Fed does not defy the markets.
00:21It does not like to surprise markets, and markets have fully priced in that quarter point rate cut.
00:26The Fed operates on a dual mandate, to keep inflation down and to keep employment up.
00:32According to analysts, that can be tough on the Fed because the best way to fight rising inflation is to boost interest rates.
00:40The best way to fight unemployment is to cut rates, leaving the Fed with a choice.
00:46So it's definitely critical to the FOMC moving forward with plans to cut rates in the first place,
00:52leaning more towards their dual mandate on the labor side of the dual mandate, as opposed to the inflation side.
00:59However, Powell will be very vocal and attentive to the risks that inflation remains well above the Fed's 2% target.
01:08Inflation currently sits closer to around 2.6%, with some analysts pointing to the president's tariffs.
01:15One financial expert we spoke with pointed to the great inflation of the 1970s as an example of the Fed waiting too long to rein in inflation.
01:27It was so severe because it had gone on so long that by the time you break it, you really have to cause significant pain.
01:34And I think if the Fed had just taken the pain or, you know, forced the American people to take the pain a year ago, it would have been less severe than it's going to need to be.
01:48But the president has repeatedly made it clear he wants the Fed to cut rates.
01:53So now you have a situation where the Fed's credibility is impaired.
01:58You have a president that is willing to, clearly willing to, you know, exert as much influence as possible on the Fed to lower rates.
02:06And, you know, if they lower rates this time, inflation reignites, it's going to be even harder to break the back again because higher inflation expectations start getting entrenched in the economy.
02:19Be sure to stick with Straight Arrow News for coverage of Wednesday's announcement.
02:24Download the Straight Arrow News mobile app or you can also visit us online at san.com.
Be the first to comment