when Glenn Beck “This is election interference by the Fed,” was his first thought when he first heard the news that the Federal Reserve had cut interest rates by half a percentage point, the first cut since 2020.
His second thought is that the last time the Fed did this, it didn't have good results.
Returning investment banker Carol Ross joins the show to explain more.
“What the hell is going on, Carol?” Glenn asks.
“First of all, Glenn, I want you to know that I'm not overwhelmed by what's been going on. And right now, the market is moving on interest rates because we're in a lower interest rate environment,” Ross said, criticizing Kamala Harris.
“I think the important thing to remember is that when we talk about what the Fed is doing, whether it's raising interest rates or lowering interest rates, we need to put it in context. The context is that we had 15 years of what's known as ZIRP, where interest rates were at or near zero,” she continued, adding that the Fed has added “over $9 trillion to its balance sheet.”
According to Ross, this drop in interest rates could be both good and bad.
Starting with the potential negative effects, Ross says making “massive cuts” when “we're saying the economy is in great shape” would “send a signal that things aren't so great.”
But “after 15 years of zero interest rates, it makes sense to return to what would be considered a neutral rate,” she said.
“Is this an inflationary move?” Glenn asked.
“That's the thing,” Ross said. “If you think about what the neutral rate is, and it's theoretical, I don't know what the number is, but it's basically the line between tightening and easing policy, and what we're trying to do is make sure the Fed doesn't tip over in either direction. I believe we're still in that tightening territory.”
“I don't think it will cause inflation,” she says.
“I don't want to spend a dime on jobs or construction or anything right now. I won't spend a dime until I see what happens with the election,” Glenn said, adding that he would “be prepared” if Harris wins, but would “be happy to invest” if Trump wins.
To hear Ross' thoughts, watch the clip above.
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