00:00And with us now is Julia Cartwright, Senior Research Fellow at the American Institute for Economic Research.
00:07Julia, great to see you as always. This is the third rate cut in a row.
00:11Where are Americans likely to feel the effects?
00:15Great question. This rate cut was very much baked into markets.
00:19They're reacting slightly. The bond market, for example, the 10-year is slightly bouncing around.
00:27It's slightly going down, and that's probably going to have the biggest impact on long-term rates like mortgage rates.
00:34Much more directly, that's going to be tied to this rate cut are going to be credit card rates and car loan rates.
00:42And those are going to be likely going down just a bit.
00:45And mortgages are probably going to be less impacted, but slightly going down.
00:50So this is going to add a little bit of relief for the consumer.
00:52But the market was expecting this for just about the last month.
00:58So don't anticipate, sadly, huge rate decreases.
01:02The president has been touting lower housing rates, complaining that the mortgage rates were too high.
01:08So perhaps he'll get some relief there.
01:10Now, Julia, for many years we've been told that lower interest rates cause inflation.
01:15Is that likely to happen here?
01:16That's something that the Fed is balancing and walking this tightrope of.
01:22And as you mentioned, they're lowering rates primarily because of the job market.
01:27We haven't seen either the October or November official data from the BLS.
01:32Now, they did yesterday release their job openings and job losses report, which shows, as you mentioned, a softening labor market.
01:41Precipitating the main reason why the Fed cut rates, but absolutely to your point, we see inflation at 3% and core inflation, which subtracts both volatile housing and electricity at 3.1%, which is 50% greater than the Fed's target rate.
01:56And this doesn't mean that prices are going down, but what it means is that the rate of increase in prices has gone down.
02:03So Americans are feeling pressure in their wallets.
02:07They are looking for more discounts.
02:10Holiday numbers are actually just dollar amount at all-time highs.
02:15But if you look a little bit deeper into the data, the volume of articles that people are purchasing is actually down.
02:21They're opting for less premium products and fewer products.
02:25The price of the products is just higher, so we see those higher numbers.
02:29That's interesting.
02:30So the prices are still going up.
02:32They're just not going up as fast as they used to be.
02:35And people now, it seems, from what you're saying, are substituting the premium products for something a little more budget.
02:41It's interesting.
02:41I appreciate that data.
02:43Now, Julia, if you follow the politics side of it all, if next year's elections are decided on affordability, which has become the big buzzword,
02:51what do you think Republicans want to see happen most over the next 11 months?
02:56And looking at the data, what is most likely to happen that could benefit them?
03:02Well, Trump just kicked off his affordability tour in Pennsylvania yesterday,
03:08and I think he is doing himself a giant disservice by calling it a Democratic hoax.
03:14There are some headwinds and some tailwinds on the affordability front,
03:18and I think that Republicans want Trump to focus on the headwinds that Americans are feeling in their pocketbooks.
03:24The University of Michigan Consumer Sentiment Index demonstrated that consumers are feeling slightly more optimistic this month than last month.
03:33But if you zoom out, they're actually feeling quite a bit less optimistic than they were at the beginning of the year when Trump took office.
03:40So consumers are feeling squeezed.
03:43They do not see this impact of a lot of Trump's positive rhetoric in their pocketbooks.
03:51As I mentioned, they're rolling back a lot of their spending, right?
03:54Maybe not dramatically, but we do see it in the numbers that consumers are slightly changing their behavior.
04:00Now, next year in 2026, the American economy is going to feel a lot of the subsidies of the big, beautiful bill.
04:07And also, people will see tax rebates, especially on tips and overtime pay,
04:12which will give the consumer slightly more breathing room.
04:15However, it's important to keep in mind that the big, beautiful bill still includes extremely high government spending,
04:22which is just going to further add to the government debt, which is not good news for long-term interest rates.
04:28Very interesting.
04:29So you think that although the president has called it a hoax, as you pointed out,
04:34Americans in certain areas, they are feeling strained and better to address that.
04:38Now, do you believe you mentioned a couple of things, tariff rebate checks?
04:43The Treasury Secretary has touted that next year's tax refunds could be historically high.
04:48Outside of that, do you believe Trump's economic policy so far will result in tangibly better circumstances for people?
04:56And if you do, how long will that take to happen?
05:00Yep, great question.
05:02The Trump administration, as far as the economic impact, is a mixed bag.
05:06There are a lot of things that are positively impacting the economy, especially the deregulatory aspect of his administration.
05:14We have seen a lot of companies see that as a very welcome direction.
05:21Crypto is a perfect example of this.
05:24And Trump is leading the world in crypto regulation and from a very deregulatory and very open stance.
05:32Now, his tariff policies are giving consumers and companies a lot of uncertainty.
05:38And there have been a mixed bag of what the Trump administration has given for the justification for these tariffs.
05:44However, I think that
05:45when the Trump administration actually decided to lower tariffs on coffee, for example.
05:56So they're admitting that the increase in these tariffs do actually increase prices.
06:03So those are two big things.
06:06The tariff rebate checks, I think, are somewhat of a boondoggle.
06:10I think what's more important is to say that we are not going to have these
06:15aggressive tariffs on various products that the consumer is paying for initially.
06:20And then we can just skip the rebate checks.
06:22But there's a lot going on in the Trump administration, some positive and some negative for the economy.
06:29I felt one interesting data point that came out recently was the volume of imports in the recent reading has fallen a lot,
06:36which indicates that maybe Americans may be buying more made in America products,
06:41which may ultimately, however long it takes, Julia, start to show up in people's paychecks.
06:47We'll have to wait and see.
06:48That's Julia Cartwright with A-I-E-R.
06:50Appreciate it.
06:51Thank you, Julia.
06:52Thank you for having me.
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