Is it a good or bad thing to cut interest rates?

Is it a good or bad thing to cut interest rates?

I personally have concerns that Powell's comments have created risks that are too open for markets, because while inflation is slowing, there is still clearly a risk that it will catch fire again.

Falling commodity prices, driven by a slowdown in manufacturing, are certainly causing a slowdown in prices, but demand from the still-hot services sector is pushing prices up by more than 4% a year. The record of the 1970s comes as a stark warning to say the Fed's inflation-control targets have been met.

Market expectations that the Fed will release money again could result in a surge in the stock market, and furthermore, the asset market. Now that the AI bubble is in full swing, it's as if the Fed is fueling the fire.

Was Powell unaware of these risks? Of course he does. But Labor Department data and commodity markets, which made the biggest adjustment since the 2009 financial crisis, likely put the Fed's eyes on the possibility of a recession, not inflation.

Nevertheless, it is concerning to see interest rates and the dollar fall sharply, leaving expectations for a rate cut so open that raw materials are soaring. In particular, inflation expectations are soaring fast today as oil prices soar due to Libya's suspension of oil production, Israel-Hezbollah clashes and the suspension of negotiations in Gaza.

Considering that international transport costs have been rising so fast recently that they are traditionally about six months ahead of producer prices, there are concerns that Powell may have downplayed the risk of a resurgence in inflation too much.