Blog: Unintended Consequences of Cutting Rates
The pressure to cut rates for the wrong reasons can lead to undesirable results.
The US administration has been pressuring the Fed to cut rates for two reasons:
- To reduce borrowing costs for consumers and businesses, and
- To reduce interest payments on the national debt.
Both goals are laudable, but there are problems with achieving them. While I've already discussed monetary policy and politicians, discussing the potential consequences of the administration's assumptions might be worthwhile.
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