What the Fed Chair Is Really Signaling
Showing mention at 5:00 — highlighted below
Transcript
24 segmentsThe Federal Reserve announced that it will be keeping interest rates steady. Meanwhile, nine of the 19 Federal Reserve policymakers suggested they expect to raise the interest rates later this year. Speaking after arriving in Paris, President Trump criticized the decision says he'll defer to his newly appointed Fed Chair Kevin Warsh. It just keeps a country down, you know, so it's so. unusual. But we have a very good guy over there now, so I'm guided by what he wants. President Trump has repeatedly demanded that the Fed cut interest rates. The rate decision comes as inflation has remained higher than the central bank had wanted. Joining us to talk about this, Patrick Anderson, founder and CEO of Anderson Economic Group. Patrick, always a pleasure to talk with you. Nice to talk with you, Marine. So why did the Federal Reserve decide to keep the rates unchanged at 3.5, 3.75, despite this elevation and inflation? The Federal Reserve made the right decision, and they made the only decision they really could. This is a new Fed chairman. This is... institution that's been under a lot of pressure. They needed to close ranks and come up with a strong indication that they were together on this. And they did. This is a unanimous decision to keep the federal funds rate right in the same range that they had between three and a half and three and three quarters. And that underlines what's most important to the economy in the United States and what the rest of the world is looking to the U.S. to provide, which is stable monetary policy and somebody in charge. that is serious about inflation. And yeah, I expected the president to have some kind of criticism, but that was, you know, again, he did what he was supposed to do there. He said, gee, I wish it was lower, but I'm going to defer to the institution. That's what we want. Of course, whenever we hear about things when the Fed does make a move or doesn't make a move, we often wonder, well, what does it mean to me? What does it mean to my 401K? What does it mean to my ability to buy a house? Can you outline some of that? I think the big, you know, really big news for people that are looking ahead, which should be all of us, is, all right, this just over the last week, we've had an agreement that at least temporarily ends the Iran war. We have a new Fed chairman that's taken office. We've got a Federal Reserve meeting now where they say, okay, we're all on the same page. We're going to keep it where it is now. We're going to remember that we want to keep inflation at 2%. All those are really positive indicators for people that want to buy a house in the future, people that are saving for retirement, people that want the United States to have a good economy, which is essentially all of us.
Yeah, absolutely. So you mentioned the war in Iran, the war with Iran, and now this memorandum of understanding has been signed, and we, another 60 days here of negotiations, hopefully we'll end with something permanent. But this ongoing uncertainty, this ongoing geopolitical uncertainty, is this having an impact also on the Fed's decision, do you think? Certainly. And one of the reasons that the Fed is not in the same position it was last year where there was a legitimate case to lower interest rates is because we do see inflation kicking up. And some of that has to do with. oil and fertilizer prices. And by oil, I mean, I don't just mean gasoline at the pump. I mean fuel oil, diesel, a natural gas that goes into heating and electricity. So there's a lot of pressure upwards on prices. There's some pressure from tariffs that's getting into the statistics. For Americans, they're looking at that price of gasoline when they fill up every week, and it really affects them, as it does also grocery prices, which are affected strongly by the cost of just driving vegetables to market, which diesel fuel is involved in. Definitely, we've seen inflation kick up a little bit. And I'm pleased that the Fed is serious about it. And one of the things that the new chairman said was our goal is still 2%. We should have 2% inflation. He was serious about it. He said it multiple times. I think he had to correct the press. It's 2.0%. Two on the left side of the decimal point, zero on the right. That's exactly what we want from a Fed chairman. Oh, so you're, okay, so I was going to ask you with the new Fed chair, Karen Kevin Warsh's, this was his first decision. So this was his first decision on the big, big chair here. So do you think that this is going to be indicative of how he's going to be operating in the future? Yes. And this particular chairman, Kevin Warsh, was clear about what he wanted. He wanted to shrink the Fed's gargantuan balance sheet. which he needs to do. He needs to look at the, you know, kind of rein the Fed back in out of talking about things like climate change and stuff like they. Get it back to its job and as well as look at monetary policy afresh. He's also saying let's not have so many press conferences. And I think this is really refreshing. I'm glad we've got a new chairman. I'm glad we've got a Federal Reserve Board that's saying our job is to do this. Let's try to do that. as opposed to do these other things. All in all, I think, very positive for the United States.
If, again, we talked a little bit about how this would impact our, you know, our buying power in terms of homes and so on. But when we also look at this, this affects our credit cards, auto loans. These are, these are, when we talk about this issue of affordability, which is, you know, the buzzword this year and this political year, as we go to vote for a new governor and senator and so forth, I mean, these are really important issues to people, their credit card rates, they're auto loans. consumer borrowing, are we going to see any relief there? I completely agree with you, Marie. These are important issues, particularly for Michigan. It's always important to remind people, why does Michigan... you know, have a good economy, and what do we bank our economy on? We make our economy on tourism, on agriculture, and on selling manufactured goods. Those are the three main things we do. We also have a substantial insurance industry and mortgage industry. So that means we are sensitive to things like inflation and interest rates, as well as the cost of fuel. I think what the decision the Fed made here is really the only one they could do. I'm glad they did it. They did it unanimously. Yeah. We got a strong statement here. And looking ahead, this is what people in Michigan should want. Anything concerning you here in the next before the end of the year? What do you think we're going to see here? You know, I can't believe we're talking about this, but we are looking now at the second half of the year already. That's true, Marie. Just a few years, just a few days away from that. So anything that concerns you up and coming here? Of course. We have the Iran war, as you correctly pointed out, is now in a situation with a memorandum of understanding. That is not a treaty that ends the war, but it's certainly a big step down from the inflation. And a step back from the wartime that affects, of course, our servicemen and women and their families and people have relatives and friends overseas, as well as the price of oil. So that's a big reduction. I think getting this new Fed chair installed, again, a big reduction in uncertainty. But yeah, it's still a dangerous world out there. And the war now, we just have a memorandum of understanding. Hopefully, as you said. I'm not optimistic about 60 days, but sometime over the remainder this year, we get a settlement on this. Patrick Anderson, founder and CEO of Anderson Economic Group. We always love having you on board to talk about the economy. Thanks for joining us. Have a great day. And we will continue here on WJR. You're listening to All Talk.