This sounds like a legitimate cut. The Fed is mandated to control inflation and maintain full employment. The Trump economy is putting them between a rock and a hard place. I would predict that we will not have two additional cuts this year because inflation is on the rise and will continue to increase as the months go by, continuing into next year. It is far easier to solve unemployment than inflation.
Thanks President Biden!
AI
"Economists and financial analysts widely conclude that the U.S. economy achieved a soft landing following the COVID-19 pandemic and subsequent inflation spike. While President Biden's administration credits its policies for this outcome, some economists and political opponents argue that fiscal stimulus contributed to inflation. The Federal Reserve's aggressive interest rate hikes were also a major factor in controlling inflation.
What is a "soft landing"?
A soft landing occurs when the Federal Reserve raises interest rates to bring down inflation without triggering a recession. This process is notoriously difficult to execute and has been achieved only a few times in recent U.S. history.
Key economic indicators and trends
By the end of 2024, the U.S. economy had slowed enough for inflation to fall significantly without entering a recession. Key indicators show the following:
- Inflation: After peaking in 2022, inflation was approaching the Federal Reserve's target of 2% by late 2024.
- Unemployment: The unemployment rate remained below 4% for over two years during the Biden administration, a streak not seen since the 1960s.
- GDP Growth: The economy experienced solid growth through 2024, defying many forecasts that predicted a recession.
How the outcome was achieved
Multiple factors are credited with achieving the soft landing:
- Fiscal Policy: The Biden administration's policies, such as the American Rescue Plan, the Bipartisan Infrastructure Law, and the Inflation Reduction Act, provided historic investment and recovery support following the pandemic. The administration and supporters argue this strengthened the economy and helped avoid a recession.
- Monetary Policy: The Federal Reserve played a crucial role by aggressively raising interest rates to combat inflation. By late 2024, with inflation cooling, the Fed began to ease its policy, further signaling a successful soft landing.
- Easing Supply Chains: The untangling of global supply chains post-pandemic was another critical factor that helped to bring down inflation.
The debate over the soft landing
Despite the positive economic outcome, a debate persists over the Biden administration's role:
- Biden Administration's Claim: Officials, including the Treasury Secretary, have claimed credit for the soft landing, arguing that the administration's policies stabilized the economy and created a robust recovery.
- Critics' Arguments: Opponents and some economists contend that the large-scale fiscal stimulus, particularly the American Rescue Plan, overstimulated the economy and worsened the initial post-pandemic inflation. They point out that the Fed was the primary agent responsible for curbing inflation through interest rate hikes.
- Mixed Economic Signals: For many Americans, persistently high prices on essential goods tempered their perception of the economy, despite positive overall economic data like low unemployment and rising wages. This led to a "two-speed economy" perception for a time, where macroeconomic data appeared strong, but many households still felt financial pressure.