Forget Rate Cuts: Why the Fed Is Right to Hold the Line Against Donald Trump's Demands

Jerome Powell has stated that the Federal Reserve has not cut interest rates in response to the tariffs imposed under Donald Trump. Is this a good thing?

In my opinion, yes—it’s a good thing.

I’ve consistently been against lowering interest rates, primarily because I don’t depend on credit as much as the average American consumer. I don’t even own a credit card. When I need something that falls outside of essential expenses, I’m far more likely to borrow from friends or family—if at all—rather than take on debt through traditional lenders.

As someone who prioritizes saving, lower interest rates are a net negative. They reduce the yield on high-yield savings accounts and other low-risk savings instruments, which undermines my financial strategy. While it’s true that lower rates can drive more activity in asset markets like stocks and cryptocurrencies, that kind of artificial stimulation often contributes to economic bubbles across various sectors—something I view as risky and unsustainable.

Tariffs, on the other hand, do have the potential to affect me—but only to a limited extent. I don’t purchase many imported goods. The main exception would be electronics, which I only buy every two to three years. My most recent major purchase was an electric scooter. Despite being damaged through my own negligence, I have no plans to replace it until absolutely necessary—likely not for another year unless it becomes completely nonfunctional.

From where I stand, the tariffs accomplished something similar to what the Federal Reserve typically tries to do: slow down consumer spending. But in this case, the slowdown wasn’t severe enough to justify a rate cut to stir up more spending, and I believe that restraint was wise.

In fact, I’d argue that consumer spending is still too high. Rather than making borrowing easier by reducing rates, the Federal Reserve should consider raising them to temper excess consumption and encourage more prudent financial behavior. Responsibility is such a novel thing...