It is a bit bizarre that that NYT decided to frame the March Consumer Price Index data as raising a question about the Fed’s ability to cut interest rates this year. The subhead is:
“The surprisingly stubborn reading raised doubts about when — and even whether — the Federal Reserve will be able to start cutting interest rates this year.”
The Fed can cut interest rates any time it wants. Higher inflation data, like the March report, make it less likely that it will choose to cut rates, but the Fed still clearly has the option to do so.
This distinction is important since people should realize that the Fed is making policy choices. It has to weigh the risk of inflation compared to the benefits of lower rates, most notably lower interest rates on mortgages and car loans.
People can agree that the Fed is making the right call if it decides to put off any rate cuts, but they should recognize that it is not forced to delay cuts. It has chosen to do so.
The post News for NYT: The Fed is Able to Cut Interest Rates Tomorrow; Whether it Does or Not Is a Policy Choice appeared first on Center for Economic and Policy Research.