NICK GOSNELL
Hutch Post
HUTCHINSON, Kan. — Creighton University economist Ernie Goss talked to Hutch Post after the Federal Reserve cut interest rates by 50 basis points in their first rate cut since March 2020.
"They did not reduce the long-term interest rates," Goss said. "That was short-term interest rates. That would be the prime interest rate from 8.5% to 8%. If you look at the recessions, the last 10 recessions, what happens at the beginning of the recession? The Fed cuts, takes big whacks off the interest rate."
Goss is dubious about the impact of this cut.
"They're trying to lower the cost of borrowing and head off a recession, which is not going to do it," Goss said. "You're going to have to they'll reduce rates again on November the 6th and 7th when they next meet. They say they whipped inflation. Well, they didn't whip inflation. The core CPI is still around 3 percent, which is well above their target of 2 percent. They whipped, at the time they thought they were whipping inflation, they whipped the economy."
Goss believes this is too much turning of the rudder.
"That's the problem, in my judgment," Goss said. "Every time we see a real problem, we overreact. I mean, you overreact on the up, you overreact on the down. They bailed out three banks in March of 2023. That should not have been done. I mean, in other words, failure is a part of the system. But now we've got a Treasury and it's both Republicans and Democrats, the Treasury that says, well, we can't allow that to happen. Yes, you can, and unfortunately, they will not. And the Fed's now saying, well, if you're too big to fail, we won't let you fail."
Goss thinks that economically, we may need to live with a little pain, at the risk of overreaction and causing more.