NewsNation

Fed needs to cut interest rates by half a point: WSJ columnist

(NewsNation) — Federal Reserve officials are meeting this week to discuss interest rate cuts.

These are still up in the air, though, and it’s not currently clear how much interest rates could decrease.


Wall Street Journal chief economics commentator Greg Ip says they should do so by half a point.

“I don’t know what they’re going to do. I don’t think anybody does right now, except maybe them,” Ip said on “NewsNation Now.” “But I think if you actually look at the level of rates today, they look too high.”

Federal Reserve officials’ current target is a little over 5.25%, Ip said, because they thought inflation would be more severe than it actually was.

“If you look at inflation today, those risks have receded dramatically,” Ip said. “If you look at underlying inflation, it’s around 2.7%. It’s not quite to the Fed’s target of 2%, but a lot of forward-looking indicators suggest that we will be very close to 2% a year from now.”

This means, he added, that there’s no justification for having rates at the level they are currently. Even going down half a point would mean their target is 4.75%, Ip pointed out, which would “still be very high.”

“So I say time to start getting them back to a normal level,” Ip said. “They’ve kind of dragged their feet to this point. I think they need to get onside with where the economy is right now.”

The Associated Press contributed to this report.