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10/23 Thread (BC):
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It really is that simple employers ...
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Chief
This is the first time when markets were meh in reaction to a rate cut. They think that their target inflation rate will be achieved until 2028. But they are still going to cut the rates because job market is weak…which is because this government massive intervention in private sector. So rate cut doesn’t make sense to the market.
Conservatives are going to get a very bitter taste of a primary conservative principle. Big government doesn’t work
Your entire post assumes that job market is bad because there is no free money. Have you seen the profit margin made by America’s companies? Or the money their CEO taking home? I mean Tesla is willing to pay ONE man a trillion dollars. So that assumption was good when economy was somewhat independent and our CEOs were not busy kissing the ring
Reduction in interest rates stimulates borrowing but businesses will borrow only when they’re able to service those loans.
Ultimately every company, whether B2B or B2C, needs a robust consumer segment that will spend and consume products and services. Look at the middle class and lower income segment of the population - imagine the impact of layoffs that is sweeping the nation - from Federal agencies to private sector companies - even if interest rates go down, will a laid off person spend more on borrowed money or will they tighten their belt to cut on expenses?
Employment has to significantly increase to stimulate the spending economy - businesses are not going to borrow to hire people if there’s not enough business to go around. Many large hospitals are incurring losses (for various reasons). They’re not going to hire more people just because they can borrow more money. Instead, they’ll cut expenses to reduce losses.
The Starbucks CEO thinks the downturn will not inhibit people from spending $6-$7 on a cup of coffee - he’ll soon realize that unemployed folks are not going to spend their unemployment or savings on an expensive cup of coffee.
So no, easy and cheap credit will not help address the core issue of unemployment.
Chief
Not much difference given the context.
This was political and not rooted in economics.
25bps won’t do anything…even another 25-50 doesn’t put us in “accommodative” territory. As M1 said - this just buys the fed time and optionally as more data comes in. And as always, the fed will be a lagging indicator.