Nothing in the latest economic data provides a justification for the Federal Reserve to cut interest rates after its March meeting, Breitbart Economics Editor John Carney told Fox Business host Larry Kudlow in a Wednesday interview.
Kudlow noted that the economic data clearly shows that the central bank’s tightening has not slowed inflation, which makes any move by Fed officials to cut rates appear motivated by political, rather than economic, considerations.
“Other than goosing the economy to reelect Joe Biden—which is a very cynical and very depraved idea for the Federal Reserve which is supposed to be independent—there is no reason to cut interest rates period right now,” Kudlow said, adding, “There is no recession. There is no jump in unemployment. Inflation numbers are way above their targets.”
“There’s no catalyst for a rate cut right now,” Carney agreed. “It would be a total optional rate cut, and I actually think the option is being taken away from them. If you look at this retail sales report, it’s highly inflationary because remember what retail sales are. It’s sales of goods. That was supposed to be the source of disinflation right now, but people snapped goods up.”
“If you look at the import prices,” he continued, “they were supposed to fall because goods were supposed to be dis-inflating right now. They’re not. They were flat for December, which means that we will have a lot more goods inflation than people are counting on.”
Carney also pointed to other inflationary factors impacting the global economy, particularly the shipping problems in the Red Sea.
“I’m not that worried about what China’s going to do to global inflation. I’m worried about the Red Sea because we’re about to have a massive supply constraint that will be felt all over the globe,” he said.
“As ships go around Africa, let’s say it just adds 20 percent to the shipping time,” Carney added. “Guess what? That’s one out of five ships that gets absent from the total supply of shipping. That will hurt global supply at a time where demand for goods is rising. Guess what that equals, Larry? It’s more inflation. The Fed can’t cut honestly right now.”
Carney believes that Federal Reserve Chairman Jerome Powell will follow the advice laid out by Fed Governor Christopher Waller in a speech Monday, in which Waller argued that the Fed does not need to rush into cutting rates right now.
As Carney wrote in Monday’s Breitbart Business Digest:
Waller argues that the soft landing means the Fed can wait to cut rates.
…
That’s a point we’ve raised a number of times. If we’re headed for a soft-landing, there’s no catalyst for a rate cut early this year. Nothing is compelling the Fed to cut quickly or frequently. A more prudent approach would be to wait to see how the economy develops this year before implementing the first cut and then wait to watch how it reacts to that decrease before acting again.
“I think actually [Powell is] going to take the stance that Chris Waller laid out in his speech, in which he said there’s no rush to cut,” Carney told Kudlow. “There’s not a downturn that we need to avoid. Usually, when the Fed switches to cutting, it cuts very rapidly in succession because there’s a downturn they’re fighting off. That’s not the case now. There’s no rush. They can hold off.”
“Waller said this to us,” he continued. “And Waller is very persuasive because he’s one of the smartest guys they got; so, Powell is going to listen to him I think.”
Rebecca Mansour is a Senior Editor-at-Large for Breitbart News. Follow her on X at @RAMansour.
