The budget is blowing up in their face and they know it. The tax cuts did not pay for themselves and deficits are ballooning, federal spending is the highest in 10 years as tax receipts have been slowing. It’s a receipe for budget disaster. Don’t give me this two faced nonsense:
It’s cheerleading and playing the confidence game, while at the same time demanding a 50bp rate cut by the Fed, an utterly ridiculous suggestion especially in light of the earlier statement.
You knows who makes a statement such as this? Someone that’s worried about a lot of things. Worried that funding requirements are out of control and they can’t stop it. Worried about the slowdown morphing into a recession. NOBODY will admit to a recession being a possibility, too much is at stake and consumers need to be kept spending.
The real worry I suspect is obvious and is a political calculation: They don’t want a recession to coincide with the 2020 election. That’s how elections are lost. Trump knows this. Larry Kudlow knows this and even Stephen Moore knows this. Hence they’re asking for rate cuts.
Getting the Fed to stop the balance sheet rolloff and to stop rate hikes was the first obvious step and the Fed acquiesced claiming to be data dependent.
The second step: Get the Fed to cut rates. Markets are already pricing in a rate cut for 2019:
That’s recessionary risk this late in the cycle. But Larry Kudlow apparently thinks a recession can get averted by juicing markets with more cheap money.