Fed will fix its own fumble with rate cut

Last week, Federal Reserve Chairman Jerome Powell telegraphed to the markets that a rate cut is coming.

There seems to be quite a bit of uncertainty over why the Fed would cut rates so shortly after aggressively raising them — eight times since 2016, with the most recent hike just last December.

Much of the speculation concerning the reason seems to be focused on a shaky economy or politics — after all, it’s that season again.

But make no mistake about it: A rate cut isn’t due to the economy, even if that’s the Fed’s cover story. I think the reality is that the Fed realized it raised rates by too much, too quickly. So basically, it is fixing its own fumble.

The Fed raised rates last year fearing the potential of inflation there never was a hint of to begin with. There was and is no inflation in sight, and a growing economy and strong job market are good things.

The truth is, we could actually use a little wage and general inflation to make up for the stagnant growth in the lost decades of the Obama and Bush administrations.

Of course, Wall Street was already anticipating a rate reduction, so essentially Powell merely complied with what the buoyant markets were instructing him to do: Lower rates in order to let the US expansion continue.

And after Powell’s message, the markets clearly celebrated, with the Dow closing at over 27,000 for the first time ever.

The Fed, for better or worse, is the central bank to the world. And when it raises rates, our dollar rises rapidly. A rising dollar makes US goods more costly overseas, decreasing competitiveness.

The corrective action of cutting rates is a smart move — there’s nothing wrong with fixing mistakes. It will benefit not only the dollar, but hard-working Americans trying to keep more of their paychecks and pay less in the form of credit card and auto loan interest.

Kudos to the Fed for being brave enough to rectify its own faux pas.