Federal Reserve Update

Cogport last reported about the Lagging Federal Reserve on August 2.

At that time the Fed did not reduce rates. Member Adriana Kugler had just resigned after not participating in the Committee vote.  Since then, Trump has appointed Stephen Miran as her replacement.  He will be a proponent of lower rates.

Cogport has been a proponent of lower interest rates since August 2024.

Since then, we’ve had a weak labor report.  The BLS reporting fiasco is another subject, but Trump correctly took action to change management.  We cannot have good policy without more reliable data on Labor.

The labor report confirms the need for interest rate reduction. 

Two Year Treasury Note rates are well below the Fed Rates, another market indicator that the Fed is out of touch.

The Fed Policy is Over Restrictive with the Fed Rate at 4.5% and Inflation at 2.7%.  That spread is the highest in history for a normally functioning Economy.

Today’s inflation report for July held at 2.7%.  No effects from Tariffs.

And lower interest rates are a major component to success of the investment deals that Trump has lined up at an astounding level of potential.  GDP could run at a rate over 5% by the end of 2026.  That would be great for small business and people of all income levels.

The center of the problem is Fed Chairman Jerome Powell who has a record of poor decisions and has become not only obstinate, but petulant.

He is surrounded by people of similar ilk.  They have rigid goal of 2% inflation.  In the last 50 years history, there have been only five years of 2% inflation or less.  The target is too far below norms.

The Fed should cut rates by 0.5% in September.  However, the Fed has a history of small incremental moves.  If they do not cut rates, all hell will break loose.

REFORM

The Fed has long been an independent organization without oversight or control from the Federal Government.

Cogport believes the concept of independence is valid. It is better not to leave decisions on interest rates in the hands of politicians.

However, the current dysfunction of the Fed exposes the need for Major Reform.

Cogport has previously proposed some reform.

Here are issues that should be addressed:

1.      No recourse for poor performance.

2.      A need for accountability.

3.      Lack of options to manage membership of the Committee.

4.      An archaic organizational and voting structure.

In the next report Cogport will propose a Comprehensive Plan to address these issues.

David Hollaender                                                 August 12, 2025

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