Powell announces Fed rate cut; Goss explains why

NICK GOSNELL

Hutch Post

HUTCHINSON, Kan. — Federal Reserve Chairman Jerome Powell announced on Friday that "the time has come for policy to adjust". That means rate cuts are coming, most likely in September. Creighton University economist Ernie Goss spoke to Hutch Post before the announcement, but he was anticipating this and he's pretty sure he knows why they need to cut.

"They're saying it's because they defeated inflation," Goss said. "No, that's not the reason now. That may be partially true, but, well, it is true they defeated inflation, but they brought the economy down as well, and the economy, the overall economy is not doing well."

How fast will they cut? Powell wasn't clear.

"The real issue right now is, is it going to be a quarter percent cut or a half percent cut," Goss said. "We could have a half percent cut, depending. Now, what individuals we all need to be watching out for is those first-time claims for unemployment insurance on each Thursday, but also on the employment report, which is issued on September the 6th. Very, very important."

Unemployment rising could be another harbinger of a bigger need for a rate reduction.

"Back in the 90s, Alan Greenspan considered six percent full employment unemployment rate. It's not six anymore, and it depends a lot on what's going on in Washington," Goss said. "We now just, July, we had the largest federal deficit, second highest federal deficit for a July month ever, $244 billion. So the federal government's a lot of this, making it very hard to read these numbers, but a good number, I feel a good number is in the mid fours, but the problem is, it's going, it's rising, it's going to go beyond four and a half percent, and in my judgment, it'll go above four and a half percent before the end of the year. In fact, I think it'll hit four and a half percent on September the sixth."

If that does happen, then it's not out of the realm to see a 50 basis point cut later next month.