Blinder Speaks Out on Fed Day
Moody's Talks - Inside Economics
Deep Dive
Why did the Federal Reserve cut interest rates on the day of the podcast recording?
The Fed cut rates by 25 basis points, a move that was anticipated but marked a closer call than previous meetings. The decision was influenced by concerns over inflation and the labor market, as well as the need for more clarity on incoming economic policies under President Trump.
What are the key uncertainties the Federal Reserve is facing regarding future economic policies?
The Fed is uncertain about the impact of potential policies under President Trump, including tariffs, deportations, and tax cuts. These policies could influence inflation and economic growth, making it difficult for the Fed to predict the appropriate course of action.
How does Alan Blinder view the current state of monetary policy under Jerome Powell?
Blinder believes monetary policy is being conducted well under Powell, with the possibility of a soft landing for the economy. He acknowledges the challenges faced by the Fed but thinks they are handling them effectively, despite some lingering uncertainties.
What does Alan Blinder think about President Trump's potential interference with the Federal Reserve's independence?
Blinder views any interference with the Fed's independence as a
What historical period does Alan Blinder find the most fascinating in his book on U.S. monetary and fiscal history?
Blinder is particularly partial to the Clinton years, which saw low inflation, high growth, and budget surpluses. He credits Clinton's administration for maintaining a hands-off approach to the Fed and for making political virtues out of deficit reduction.
What does Alan Blinder consider the least favorable historical period in U.S. economic history?
Blinder identifies two periods as least favorable: the rhetoric around supply-side economics during the Reagan era and the Nixon-Burns period, which saw significant economic mismanagement, including price controls and loose monetary policy that contributed to high inflation.
How does Alan Blinder explain the stock market's reaction to the prospect of a Trump presidency?
Blinder suggests that the stock market's rise is driven by the expectation of lower marginal tax rates for high-income individuals, potential corporate tax cuts, and deregulation. These factors outweigh concerns about civil liberties and other policy issues that might worry critics of Trump.
What role does Alan Blinder believe supply shocks play in economic policy decisions?
Blinder argues that supply shocks, while significant, tend to crest through the economy and then disappear. However, their impact on the price level may persist if the underlying policy changes, such as tariffs, remain in effect.
- Fed funds rate cut by 25 basis points
- Projection of only two rate cuts in 2025
- Stock market fell, 10-year treasury rate increased
Shownotes Transcript