Think carefully. I will grade your answer. 
The current odds suggest only a 30 percent chance the Fed will cut rates by a half-point on September 18.
I believe those odds are very understated because I think the next CPI report will be very Fed friendly. I will write that up shortly.
Meanwhile, the question is how should Trump react if the Fed were to cut by that much, not what Trump will do.
When Will We Know?
We will not have a firm grasp until Wednesday September 11 (CPI report). The Fed meets a week later.
My guess is the combination of last Friday’s jobs report plus the CPI report will allow the Fed to cut by 50 basis points if it wants to.
Self-Grading the Answers (depending on precise reasoning)
- Rejoice: B+ minimum to A+
- Complain: F to C
- Neither: F to C
- Both: B- minimum to A+
Rejoice Discussion
Those who said Rejoice have the right idea. Trump should privately rejoice. A deteriorating economy rates to benefit Trump. Those who rejected both only because they believe complaining is counterproductive get an A.
Whether complaining will add or subtract depends on how loudly and in what ways Trump does that. Complaining could very well be negative. Full A+ credit for those who fully understood the nuances.
Both Discussion
Those who said Both for the right reason get an A. The right reason is Trump should privately rejoice at an economy that is deteriorating badly enough to allow the Fed to cut that much. Those who think complaining will help, get grade A-. Those who think complaining will help if done properly get an A+. Those who think complaining is the bigger idea get a B-.
At the time I wrote the question, I thought Both was the correct answer. But upon reflection there are a couple problems with both. First, Trump is likely to overreact. Second, this economy is deteriorating rapid and Trump, if elected, will be calling on the Fed to cut if he wins. So why should trump moan now and then beg for cuts later?
Full credit if you thought about all of that and voted Both anyway. This is about what Trump should do. I have no problem with complain mildly (if it helps election chances) but it will make him look silly later when he changes his tune.
Complain Discussion
Complain has all of the problems of both but none of the recognition that Trump should be privately pleased about the economic realities.
A deteriorating economy rates to benefit trump. Those who said complain seem to have missed the key idea or ignored it.
For those who firmly believe the Fed should not cut at all, OK why?
There should not be a Fed at all. But if that’s the reason, Trump sure hasn’t been saying so.
Trump ridiculously stated that he could do a better job than the Fed. That is dangerously stupid. One thing worse than a Fed is putting politicians in charge of interest rates.
Neither Discussion
Neither is a bit confusing. But a deteriorating economy rates to benefit trump. At a minimum Trump should privately be happy.
Apply the above paragraphs and rate yourself.
Interesting Exchange
Without reservation, I agree that the Fed will not impact the election. It’s too late.
I also agree that Trump will complain even if the Fed only cuts by a quarter point.
However, the reason the Fed would cut by 50 points certainly does matter.
The Fed is very aware of the politics. It the Fed cuts by 50 points the underlying economic fundamentals will likely be poor and deteriorating.
The Fed is well aware of the lags and the potential for complaints in both directions. If the Fed only cuts 25 basis points and the economy crumbles, Democrats will be moaning.
Powell is in a no-win situation.
It takes time for rate cuts to work, but time has expired. It’s too late for cuts to save the economy. So Trump should welcome a half-point cut (privately).
A half-point cut is all but admission that a recession has started. It may even spook the market, further helping Trump.
BLS Negative Job Revisions 15 of Last 21 Months
For further economic discussion, please see BLS Negative Job Revisions 15 of Last 21 Months
I recap a slew of indicators all screaming one thing: Recession.
– Apply the above paragraphs and rate yourself.
> B+ Rejoice Privately and hope they do it again by chance.
– At the time I wrote the question, I thought Both was the correct answer. But upon reflection there are a couple problems with both. First, Trump is likely to overreact. Second, this economy is deteriorating rapid and Trump, if elected, will be calling on the Fed to cut if he wins. So why should trump moan now and then beg for cuts later?
> I failed to mention “over reacting”, which was a big miss on my part. I agree with your analysis, and I hope He keeps semi-quiet and relishes the moment, if it’s a .50 cut especially!
Thanks Mish, that was engaging and interesting, without any drama! I wish more MSM acted as such…
The media focuses on FFR and long-rate manipulation go unnoticed. Trump ran against Hillary for President in November 2016. Yellen at the Fed, dropped 10-year Treasury rates from 2.4 percent to 1.5 percent (a 37 percent reduction) during the month of January. Once Trump was declared winner over Hillary, Yellen let 10YT rates rise from 1.75 percent to 2.6 percent during that November. Election year 2024, Yellen at the Treasury, actively manipulates Treasury issuance (according to a white paper by Stephen Miran and Nouriel Roubini). This dropped 10YT rates from 5 percent to 3.75 percent (a 25 percent reduction).
If Trump wins and Juan Merchan throw him to jail Ilan and Vance will drain the swamp
and cut the US gov debt for Trump.
Trump should and I believe will talk to his best economic advisers as to what a Fed cut of 50 basis means regarding the economy.
When they advise him that the Fed is acting because the economy is weaker then they anticipated he can hold off making comment to see how equities respond.
If equities take this the way they have in the past, not a stretch to view selloff of significance will not help Harris and Walz.
add: For those who still do not get Trump he has been playing the Long game for decades.
asking whether Trump should complain, is like asking, is the Pope Catholic?
Ask the people in Springfield, Ohio for $1000, Alex?
Your question presupposes what NO ONE wants to consider:
TRUMP IS NOT IN IT TO WIN IT.
THUS, COMPLAINING is his best choice. LOUDLY.
And, when Harris completely screws up EVERYTHING, a COUP will be the only choice. She will be eliminated and then Trump rides in on his White Jack Ass.
Trump is here to win. If elected Ilan will cut 20% of his gov budget.
agree. trump does NOT want to win. for a whole host of reasons including his twisted deformed mind. he ran in 2016 as an advertising campaign and half a joke………the middlebrows lapped it up and he was the most surprised person he won. the legacy media propped him up like they are NOW as he saved them from extinction. watching a PT barnum in action is 100x more entertaining for eyeballs and advertising dollars than run of the mill boring politicians.
Oh sure that is why there are former high ranking Dems getting on board the Trump train.
That is why so many Californians, New Yorkers, Illinoisans. and other Blue State wunderkind are leaving their former state of domicile. Cause Harris Walz are competent Leaders.
That Blue drug is wearing off for many former and current Dems.
bwaaaahhhhhh. it’s a uniparty spend borrow and bomb………i’m talking about the man, donald from queens. he doesn’t want to win. the fact that there are idiots who are part of his cult and want to work for him for some slice of potential power is irrelevant to what i was stating……..he loves the grift and campaigning and rallying and being on the idiot box whether in courthouse or on CNN debates…………he doesn’t want to govern. it’s quite hysterical to observe
Thanks for the clarity.
What did Einstein say about intelligence and stupidity?
On full display here at mish dot com economic sorcery, and throughout all humanity.
Pity that TPTB couldn’t let a few more of us in on the behind the scenes circus show.
Our heads explode with presidential promises like no tax on tip and giant child tax credits for kids as if the potus could do it by they-selves….
Maybe you saw the story about 150k for illegal aliens to buy houses in Nevada?
Truly stupidity has no limits.
Humans are gullible and easily manipulated by the politicians who know their constituents and want to keep and or get aboard their positions on the federal gravy train.
Gotta go look at the tea leaves, could be something important…
Trump wouldn’t be running for President if he didn’t want to win.
Iran isn’t Israel’s #1 enemy, Egypt is. Philadelphi was paved. The IDF is mopping up Hamas hiding in civilian’s safe zones, getting tips from Palestinians. A ceasefire between Israel and Lebanon might be signed before the Nov election. The CIA sent Ukraine’s best troops to Kursk to be eliminated in order to cause a regime change in Ukraine.
The Israeli air force attacks Syria bc Al Sisi visits Erdogan, the Ayatollah, Iraq and Syria to build a new front against Israel, after Hamas was defeated. Al Sisi and the Ayatollah are forcing King Abdullah of Jordan to herd together with them, as his father King Hussain did, during the Six Days War. If not, the palestinians in Jordan will takeover.
the zionists are isreals #1 enemy.
Condemn the timing as too late then use it as a proof that the Harris economy sucks.
Thank you Doug. You are the only one that sees this as the best opportuity to shame Harris and Biden. I pray his advisors are rehearsing him now on how to present it.
Thank you. This was a very interesting discussion. Comments very interesting as well. I was in the neither camp.
Sell the news.
It won’t matter. The equity market is undergoing an Occam’s Razor deterministic crash for an intermediate low on 7 October 2024 and money exiting equities will drive the US debt instrument interest rates markedly lower as a very hard landing becomes rapidly evident. The lowering of Fed fund rates by a half point by the central bank to ‘catch up’ with the ten year note will be amply covered by the ongoing market supply forces on the ten year note. Mr. Trump will blame the collapsing economy on the current administration and Allan Lichtman will hedge his post Labor Day predictions on the ongoing changes in the ‘economic keys.’ The election is a toss-up but the timing of a sharp stock market decline with confirming data will be exploited by the grand wizard godfather of all carnies and the real deal political axiom: ‘its the economy stupid.’ blog
Trump is best off saying nothing. The next best thing to say is the only reason the Fed made a rate cut is to rescue the economy from Biden-Harris’ failed policies. And since rate cuts are always made AFTER a recession is called, lowering rates before the official recession call means the Biden-Harris policies have been a catastrophic failure.
Attacking the policies is a better approach than crying unfair.
Yeah, I was a little confused by the question because how he should feel and what he should say publicly IMO are totally different. I agree he should be happy the Fed is cutting. He will have an easier time reviving the economy if rates are lower.
I think he should say nothing. I remember one time Trump was griping about the Fed and how the economy was having a harder time growing than with Obama because Obama had like 0% interest rates for much of his presidency. I do not think I had a more visceral dislike of anything Trump said than that. That kind of finger pointing is what we expect from the typical pols. I felt like saying to Trump, If we wanted a typical pol, we would not have voted for you. You keep talking about being a winner and not a loser so do what a winner does. Quit griping about the obstacles and overcome them.
You need to revisit your history. Interest rate cuts usually happen long before anyone in authority admits a recession has started. Most of us who were around and aware can recall Bernanke saying everything was fine in spring 2008, long after the 2007-2009 recession had started. NBER didn’t call the recession until even later than than.
You can start with 2007, then work your way back to 2000… Bonus if you spot 2020 as a likely recession even without COVID!
Here’s the link: https://fred.stlouisfed.org/graph/fredgraph.png?g=1txm0
Why are you even pondering such a meaningless question? The Fed’s action and Trump’s reaction won’t change anything. The stagflation we are stuck with was started by the lingering affects of Covid lockdowns and the war on cheap energy / including from Russia, and the loss of confidence and uncertainty, particularly of war, that will continue to impact consumer spending. No matter what the Fed does or Trump’s response will stop Govt from spending or the Neocons from waging war.
Trump should state the facts before the Fed even announces their decision and leave the reactions to the self-interested talking heads.
Hard to know the impact but the effect here could be significant.
If the Fed cuts 0.50% and SPX rises to a new all time high trump will blame the Fed
for supporting Kamala Harris. If the the CPI is rising, the Fed cuts nothing, or just a symbolic 0.25% and SPX rises to all time high ==> Trump will complain about Biden’s high inflation that hurt American. If Sept is red and Oct is a deep red Trump wins, no matter what the Fed does.
Neither whether they are or not may be debatable but Fed independence is how things are supposed to be.
I do believe, without doubt, .50 will be done.
I do also believe it’s in Trumps interest to keep quiet, and hope perhaps they do it again before the election! This could have steam with the right approach, but not for the Dems, as they will consider, but for there opposition…
I can see how this spending, which is inevitably necessary, would be better for Trump, if the Dems (K, if she’s there) were to do so. He can paw a lot back from past bad judgements on spending, and make up for this waste quickly. He can also reduce a bloated workforce by 5% across the board, and not a blink would occur that matters, imo.
As long as investors believe there is any chance for Harris to win this election, expect the stock market to continue to do poorly. This fact along with fundamental economic weakness will trump (no pun intended) any potential positive market reaction caused by rate cuts.
Who cares what Trump whines about? if the fed cuts I expect small caps to pop so I’ve positioned on IWM selling calls on rallies and buying them back on corrections. It’s the prefect time to board the money train. …$….$
I would be NEITHER
Trump should make the case for a reduced role of the Fed in manipulating interest rates. Because of the Fed, the US is now placed in a lose-lose situation. He should explain that prolonged negative real interest rates have caused hardships for those least able to bear them, and been a major cause of inflation of capital assets and housing, bringing great wealth to those who were already wealthy.
He needs to explicitly state that the Fed has placed housing beyond the reach of the vast majority of young people, and that is wrong. Trump needs to talk about what generates real economic growth and jobs. In other words, Trump should advocate for a competitive capital market.
The probability of Trump doing this is like real interest rates, close to zero. It would take a true statesman to make the case for taking Wall Street off the dependency teat.
If the core inflation rate is 2% or less, he has no reason to complain. But if I were whispering in his ear, and if he were listening (fat chance), I would tell him to chuckle publicly and call it awfully convenient less than two months before a presidential election. If the core rate is above 2%, I would tell him to bluntly call it Fed political interference.
Trump should rejoice if he can act presidential.
I think Trump should pounce and seize on this issue, as the press always says.
All depends on what the core rate is. Powell has repeatedly reaffirmed the 2% target. To me, it depends on that.