BREAKING NEW: A risky move amid a wave of inflation and record public debt.
The US economy is at a crossroads
The US Federal Reserve (Fed) is expected to cut interest rates by another 25 basis points at its policy meeting this week, bringing them down to a range of 3.75% – 4%. This is the second consecutive cut after the cut in September, in the context of the US economy struggling with high inflation and a weak labor market.
The Dow Jones, S&P 500 and Nasdaq stock indexes all hit historical highs, but experts warn that success on the stock market does not reflect the real health of the economy.
When inflation remains “hot” and employment “cools”
According to the September report, the consumer price index (CPI) increased 3% compared to the same period last year, much higher than the Fed’s target of 2%. At the same time, data shows that hiring has been slowing since the spring, leaving the Fed with a choice between containing inflation or preventing a recession.
Ryan Young of the Competitive Enterprise Institute said:
“Three percent inflation is usually high enough to warrant a rate hike. But this time, they are surrounded by unemployment and stagnant manufacturing. Cutting rates is a gamble – and one that may not pay off.”
US debt surpasses $38 trillion – a ticking time bomb
At the same time, US debt has reached $38 trillion, with interest payments exceeding $1 trillion a year. According to EJ Antoni of the Heritage Foundation, the Treasury is heavily reliant on short-term bonds, leaving the US vulnerable if the Fed does not quickly lower interest rates.
“We are rolling over short-term debt and praying that the Fed will lower rates soon. If not, the US will pay a heavy price for many years to come,” Antoni warned.
⚠️ Pressure for Change at the Top of the Fed
Former Fed Governor Kevin Warsh has been highly critical of the current leadership:
“The reason people believe inflation will remain high is because that’s what the Fed has delivered. Until there’s a change in leadership, they’ll keep making the same mistakes.”
Warsh, who is being considered by the Trump administration to replace Chairman Jerome Powell when his term ends next year, believes that President Trump’s policies are what’s really driving prices down, not the Fed.
A move that could define a decade
Analysts say the Fed’s upcoming decision isn’t just about interest rates, but also about confidence: the confidence of the market, of the people, and of the world in the strength of the US economy.
If the Fed succeeds, this could be the turning point that helps the economy avoid recession. But if it fails, the risk of inflation returning and a widespread public debt crisis will be a shock no one wants to witness.
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