Last Updated:
First Published:
Short-term interest rates are too high. They’ll still be too high even if, as expected, the Federal Reserve cuts them by 25 basis points (0.25%) at its December meeting this week. Relative to expected inflation, the 1-year Treasury bill
BX:TMUBMUSD01Y rate would need to be cut by a full percentage point to be in line with its longer-term average.
I know this topic is controversial. President Donald Trump has been pressuring Fed Chair Jerome Powell to cut rates dramatically, even threatening to fire him if he doesn’t comply. It’s widely assumed that the new Fed chair Trump nominates will be more compliant — though too much compliance would compromise the Fed’s independence. Yet some on the political left are also urging the Fed to cut rates. Massachusetts Sen. Elizabeth Warren, for one, has been arguing that interest rates are too high.
