NOTE: Shortly after I wrote this post, the Fed cut rates by half a point. Sometimes whining works.
Donald Trump is whining on Twitter yet again that the Federal Reserve is keeping short-term interest rates too high. He’s been beating this drum for a while, so obviously it has nothing to do with the coronavirus. It’s solely because Trump wants the economy to be as strong as possible while he’s seeking reelection.
Putting that aside, it would probably be a good idea for the Fed to loosen a bit anyway. It’s low-risk insurance. At the same time, the thing we (and Trump) should really care about is long-term interest rates, since that’s what affects economic growth the most. In fact, the primary purpose of lowering short-term interest rates—which the Fed controls—is to nudge down long-term rates—which the Fed doesn’t control. But as it turns out, that’s already happened:
Over the past year long-term rates have gone down about 1.5 points. In just the last month they’ve gone down half a point. They are currently at levels below anything Barack Obama enjoyed.
I doubt that Trump knows this, but he’s already gotten the benefit of a huge reduction in the interest rates that really matter. He should quit griping.