The problem with growth in the US economy will be immediately be solved the day that we stop the trade war with China. We don’t need the Fed to counter-balance a political battle between China and the US. Mark my words, when this trade war is over, the economy will almost immediately overheat.
Also, you can guarantee that POTUS will turn off the trade war by the first quarter of 2020 so that the economy is running at top speed for the November election. The Chinese know this and they know they just have to hold on 6 more months and our political will for the trade war will vanish.
There’s an increasingly strong case that the Federal Reserve should cut interest rates to weaken the U.S. dollar and encourage greater exports—and that it should do it soon.
A strong dollar makes it cheaper for Americans to purchase foreign goods and more expensive for those using a foreign currency to purchase American goods. The dollar has strengthened relative to foreign currencies since the second quarter of 2018, and U.S. exports have essentially stagnated. While the U.S. economy surged in 2018 thanks to tax cuts, deregulation and a declining oil price, gross domestic product could have grown faster. Preliminary GDP growth over the past three quarters has been a strong 2.9%, but had real exports grown at a 3% annualized rate—which they did from 2009 to 2018—GDP would have grown by 3.2%.
The Fed’s tightening of the money supply contributed to this decline in export growth by making the U.S. dollar more valuable. The Fed has increased the federal-funds rate nine times since beginning the rate increases at the end of 2015, which boosted the demand for greenbacks. The greater the federal-funds rate, the greater the return on investments made in dollars. The Fed also ended its expansive monetary policy as the economy improved, constraining the money supply and further enhancing the dollar’s value.