EDITORIAL: Economy Fed right to forecast rate reduction

Dec. 18—In September, 12 of the 19 voting members of the Federal Reserve Board said they expected the Fed to raise interest rates one more time before the year was out.

They must have caught the Christmas spirit as Fed Chairman Jerome Powell announced last week the Fed would not raise interest rates. In fact, Powell made the highly unusual move of predicting the Fed may lower interest rates up to three times next year. Santa came early and the stock market soared.

We called for the Fed in September to not raise interest rates again as it was an unfair tax on the middle class, people President Joe Biden said he is always protecting with his growing the economy from the middle out.

We argued in September that interest rate hikes hurt the middle class more than the wealthy, and the idea of using them to hold down inflation may be old-fashioned if not outdated.

And there were good reasons for holding the line on interest rates.

The Center for American Progress reported that low income families owed the equivalent of about 9.5% of their income on credit cards, while the middle class owed about 5.2% of income equivalent, and high-income families owed debt equivalent to 2.3% of their income.

Credit card debt reached a 20-year high in 2023 at $1.03 trillion.

Powell's announcement was remarkable in that it has been very rare for the Fed and its chairman to predict good news so far in advance and remove the cloud of secrecy in which the Fed usually operates. But his reasons were consistent with how the Fed said it would play this interest rate game.

When inflation moderates — and it has — there would be no need for a continued rise in rates. And the economy shows no signs of recession with historic job numbers continuing to climb.

More and more, the U.S. is detaching itself from a foreign supply chain that has created risk to the U.S. economy in the past. We're even going to make things like computer chips at home with a huge investment from the Chips Act.

After Powell's announcement, treasury rates also began to fall in a signal the home mortgage rates may indeed be coming down as well.

The Fed move to freeze and later lower interest rates will be good for everyone and was the right move at the right time.

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