The Fed is playing politics and that's the subject of the riff. Almost every new economic number coming out of Washington shows just how political the Fed decision was to launch their 50 basis point jumbo-sized rate reduction in mid-September.
First came the embarrassingly outsized jobs report – no matter that its principal contributor was government-linked jobs. Still, it was a big number and big job numbers are not usually consistent with jumbo interest rate cuts from the central bank. Then, there's today's CPI report, which showed sticky inflation. Over the past 12 months, the topline CPI is up 2.4%, which is 20% higher than the Fed's 2% target. Under the hood, so-called core inflation was 3.3%, which is 65% above the Fed's 2% target and, while the Kamala Harris campaign blasted JD Vance for suggesting a dozen eggs costs $4 now – because they were really only $3.20 in August – that was still more than double from the Trump years.
Meanwhile, Breitbart’s John Carney reports that Vance was actually closer to the target than his critics, because inside the CPI report, eggs jumped 10%, are up 39.6% over the past year, and the average price of eggs is $3.82 right now. Mr. Carney calls this "Hillbilly Egg-igy." Ha. Ha. Ha. Mr Carney: very good play on words, but all this begs the question: why did the Fed launch its uber rate cute a little over 6 weeks before the election? That's unheard of during a presidential cycle.
INFLATION RISES 2.4% IN SEPTEMBER, ABOVE EXPECTATIONS
The Fed was being political. No matter what side of the aisle you're on, an objective look at the numbers shows the Fed was being political. That Fed head Jay Powell went out of his way at his last press conference to deny that the central bank would ever play politics – was, in fact, another clear proof point that the Fed was indeed playing politics.
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There are big soft spots in the economy, particularly manufacturing and housing, which are both in recession. Consumer spending, aided by big government stimulus, is holding up the economy, but the Fed's stated reason for their mega rate cut was supposedly a collapsing jobs market and a sure bet that the inflation rate would hit their target.
Inflation is stickier, the Fed has not hit its 2% target, and the labor market is holding up very well – for whatever reason. So, Mr. Powell, in all of his wisdom, has done what the Fed is not supposed to do: interfering with the election, trying to give the Kamala economy some last-minute juice. Literally, just before Election Day. In the world of monetary politics, Jay Powell has just dragged the central bank to a new low. That's the riff.
This article is adapted from Larry Kudlow’s opening commentary on the Oct. 10, 2024, edition of "Kudlow."
