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Markets were on the decline in early morning trading Wednesday ahead of an anticipated third rate cut from the Federal Reserve. The Fed is largely expected to announce a 25 basis-point rate cut at 2 p.m. ET today. The move would be the central bank’s third rate cut of 2019.
Fox Business host Charles Payne expressed concerns about this projected move from the Fed in an interview with Tony Katz.
“One of the more alarming aspects and underreported aspects of our economy is that after creating $4.5 trillion dollars and all kinds of different schemes to accommodate the economy, the so-called ‘inflation thing’ never came back,” said Payne. “In fact, there have been some areas of disinflation and deflation.”
Payne noted that a few core industries such as lumber, which economists would move higher in advance of the trade war with China, have actually trended down.
“One of the things I’m personally worried about is the ability to mitigate [the deflation] trend because if it begins to steepen, there’s absolutely no way they’re going to be able to fix it,” said Payne.
Federal Reserve policymakers are also grappling with challenges posed by a stronger U.S. dollar as central banks around the world issue their own rate cuts to remain economically competitive.
“If we’re in a global economy and attempting to compete with countries that have particularly unfair trading schemes, we’re at a disadvantage with higher rates,” explained Payne.
He continued: “Just in the last month alone, Australia cut rates, Chile cut, South Korea cut, Brazil cut, China cut, Denmark cut, Europe cut, Hungary cut, India cut, Indonesia cut, Japan cut, Mexico cut, New Zealand cut, Poland cut, Russia cut, Saudi Arabia cut, South Africa cut, Switzerland cut, and Turkey cut. We’ve got a dollar that’s already very strong, which makes it much tougher than it has to be for U.S. companies to compete around the world. I think that would be the primary rationale for the Fed issuing another [rate] cut.”
While Payne believes the rationale for the Fed’s anticipated cut is to keep the U.S. economy competitive, he cautioned that some economists are concerned about a slowdown.
“Some people think we need a bit of a jolt or a booster shot,” explained Payne. “But, you could go into any one of several key metrics that economists used to gauge the strength of the U.S. economy and really nuance them. For example, I think we’re very close to what they would call ‘complete employment.’ 5{46ff1f14221e6e90aab6104ff16614ca22b12c1f029f774ee196565ca96b3af3} unemployment, five to six years ago, economists would have considered that full employment.”
He continued: “And right now, I look at some of these employment surveys and some of these manufacturing surveys where they start talking about skillsets. They’re not talking about advanced training, they’re talking about getting employees who wake up in the morning and come to work. For the most part, we’ve got more people working than ever before in this country. And still, you’re going to have people as these jobs numbers come in – they went from 200,000 to 150,000 – if those numbers continue to decline, that would be a red flag for many people.”
Click the link below to hear Tony’s full interview with Charles Payne.
