Host we are back with Washington Post economic correspondent heather long. She will talk about what the fed did this week and how it affects us. Good morning. Tell me what fed chair Jerome Powell actually announced this week and its impact. Guest we had the first cut in Interest Rates in over 10 years, since the great recession. It is pretty momentous to see that rate cut happening. It is happening mainly because of the trade war. Jerome powell at his press conference after the announcement said that this was mainly driven by trade tensions and by Slower Growth overseas. Other parts of the world have caught a cold economically and we want to make sure the United States does not catch that cold. In terms of real people, i looked at houses last week. This is very fresh for me. You look up the mortgage rate, the cost to borrow money. What the Federal Reserve did is they took the rates down. It will be cheaper for companies and individuals to borrow money going forward. Host is this only affecting people who are wanting to buy a house and Mortgage Rates . Does it affect any other area . Guest yes, a lot of different people. Auto loans if youre looking for a car. If youre borrowing money to start a business. Credit cardholders. They should go down a little. Credit card rates have been a record highs lately so you were getting a little bit of relief but not like this is going to hugely help someone who has been struggling to pay all their bills. Host what reason did the for chero the fed chair give for the rate cut now . Guest mainly the trade war. That is making other parts of the world skittish and impacting the United States. One thing the chairman stressed is in amanufacturing technical recession. Output is shrinking. Business investment is going down. Basically businesses have been spooked by the trade war. The spending has totally dried up. The big concern is they stop spending and investing. Are they going to turn around and stop hiring . We got good job numbers on friday but of the companies were to dry up hiring that would be a major red flag for the economy. Host what is the Interest Rate now . How much was the cut . Guest we are still very low. Anybody alive in the 1980s think this is incredibly low. We went from 2. 5 down to about 2. 25 . A modest quarter rate cut. Anyone who has read the president s tweets knows that he wanted to see a full percentage point. He wanted 1. 5 . The fed did not do that but they did take that tiny step and it was a significant step that they have not done in more than a decade. Host lets look at what President Trump tweeted. With the market wanted to hear from jay powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate cutting cycle which would keep pace with china, the European Union and other countries around the world. As usual, powell let us down but at least he is in the quantitative tightening which shouldnt have started in the first place. No inflation. We are winning anyway, but im not getting much help from the Federal Reserve. What is quantitative tightening . Guest to provide history a little bit. We were in the midst of the financial crisis. The Federal Reserve to stimulate the economy started buying a lot of bonds. They bought Treasury Bonds and those terrible mortgagebacked securities we heard about that caused the crisis. Assetsalance sheet or ballooned. At one point ahead about 4 trillion worth of these assets sitting on their books. That is not normal. That was called quantitative easing. President trump called it quantitative tightening as they tried to sell it back a little bit. It was like a small paring back but the president argued that was harming the economy because it was not like tightening your belt loop one notch. For the past year to begin to sell some of those assets. Host lets look at what fed chair powell actually said when he talked to reporters after announcing the rate cut and what he thinks the impact will be on the economy. [video] trade is unusual. There isnt a lot of experience in responding to global trade tensions. That we have not faced before and we are learning by doing. It is not the same as watching Global Growth where you see banks weakening, central and governments responding with fiscal policy. Seems toe tensions it have a significant effect on Financial Market conditions and on the economy. They have all been a different way. We have to follow them. I want to be clear here. Orplay no role in assessing evaluating trade policies other uncertaintye policy has an effect on the u. S. Economy in the short and mediumterm. We are not criticizing trade policy. Host what is the most important thing you took away from what chair powell said . Guest it was widely telegraphed they were going to do this rate cut, the 25 basis point modest rate cut. What was a surprise was trying to figure out what are they going to do next. Are they going to do more . It is not just President Trump calling for more cuts. Wall street is pricing in two more cuts, one in september and one in december. He saw the markets go down as they thought it does not sound like he seems very keen on more rate cuts, or a little uncertain. The biggest takeaway i had was the clip you just played. Hes a very genteel person who does not like to criticize anyone. What he was saying is trade policy right now is a little crazy and we are not really sure what to do. That was kind of the essence of the message he was just delivering. These are unprecedented trade moves in modern u. S. History. We will try to do them as much as we can to keep the economy strong. White house, we cant do it all. Host if you want to join the conversation about the weouncement of the rate cut, will open up our regular lines for this segment. If youre a republican, you can call in at 202 7488001. Democrats, your line is 202 7488000. Ndependents, 202 7488002 we are always reading on social media, on twitter and on facebook. Samuel fromo ellenwood, georgia. Good morning. Caller good morning. At 91 yearsis old how would this affect the cd rate . Guest thats an excellent question from georgia. The answer is not the one you are going to want to hear. When they cut Interest Rates, the Savings Rates and the cd rates will go down. I am bracing myself. I have some money in my savings account and im waiting for that email to come from my bank saying the right im receiving on my savings is going to go down. I will say the good thing about certificate of deposit, if you have taken went out for nine months or 12 months, the rate is locked in for that period one youou buy another will find the rates will be lower. Host don from dunellen, new jersey. Good morning. Are you there . Caller can you hear me . Host go ahead. Caller i want to make a general have her comment generally on Interest Rates in general. I sort of a call being able to get money back from a savings ago. Nt up to 10 years sometimes up to 5 . What happened to the Interest Rates that banks were able to pass along to their consumers . What was the reason for why is that nobody can get any money for their money anymore . Thanks. Guest we also remember if you were alive in 2008, you wont forget the moment. Whats happened in this country is renters went to zero. Had experience of getting paid pennies if not nothing on savings accounts and checking accounts. While the rates have gone up a that is still5 , not very high. Not the 5 we saw before the great recession. Second of all, the other thing that happened is banks have gotten a bit more greedy. We have to be honest about that. I wrote a piece about this back in january or february. We are seeing normally when the Interest Rates go up the Savings Rates go up. Yet the average savings rate in aboutountry is still paid. 1 despite the fact Interest Rates until this week were sitting at 2. 5 . We have never seen that white of a gap between what the Federal Reserve rate is and with the bank rate is. There is a lot of question marks about whats going on and whether the policy needs to shift to encourage banks to be paying closer to the fed rate as they had in the past. Host you were talking earlier about the uncertainty the fed has for americas trade policies right now. President trump just tweeted a few seconds ago about his trade policy and heres what he tweeted. Countries are coming to us one to negotiate real trade deals, not the onesided horse show deals made by past administrations. They dont want to be targeted for terrace by the u. S. Tariffs by the u. S. Whats the difference between chairman powell and President Trump . What is that relationship like . Are they completely Different Things . Guest President Trump selected Jerome Powell for this position. That was almost two years ago now. Things have changed a lot in that time. President trump has set up chairman powell to be his fall man. Any time dog market goes down or anytime we have some weak economic data, boy, is it fed chair powells fault. Fed chair powell has tried to say out of this. He does not punch back very hard. His point has been america, mr. President , we are working for the same goal and that is to keep this expansion going. Down with the fall back into a recession that will mean people out of jobs and people losing money. He has said we are doing everything we can to keep the economy on track and this should help the president and the country. Host the president is also tweeting about the fed. He continued by saying, things are going very well with china. They are paying us tens of billions of dollars made possible by the many devaluations and pumping in massive amounts of cash to keep their systems going. So far our consumer is paying nothing and no inflation. No help from fed. Guest thats right. Hes obsessed. He tweets about it almost everyday. Most people are not thinking about the Federal Reserve every day. There is so much to unpack. A couple of key points. The white house constantly argues there is no impact on america from these tariffs and is the chinese paying. That is boulder and wrong bolderdash. And wrong. The reality is the vast majority of these tariffs are being paid by american businesses. Those businesses will either be less profitable or pass on the costs to you and me. There is a cost to americans from this. By my calculation and the Tax Foundation calculation, but tariffs in place are costing a family of four about 850 more dollars a year. Do you notice that every time . That is spread out over 12 months. You were not always realizing the extra dollar or two a day are facing, but there is a cost to this. Host diana calling from livingston, new jersey on the democratic line. Good morning. Caller good morning. That is the problem. We are in a dangerous time because we have a president who was going to bully and overrun our institutions like the department of justice and now the fed. These people think hes helping them. When he lowers the Interest Rates it hurts all of our pensions in distress. And they are in distress, especially in the Teamsters Union and the bakers union. There is a plan to fix these things. There was a plan to fix Social Security but hes neglecting all of our problems, the middle class problems. There was the Butch Lewis Act that the house passed that the senate probably will not bring up because of mcconnell. They are blocking every legislation helping people. Sweet account or savings account with a major bank like chase, they give you 1. 1 interest and they make loads of money. Guest a lot of great points. The good news is so far the Federal Reserve does seem to be holding up against pressure from the president. This is a case where the Federal Reserve is designed to be an independent institution similar to the supreme court. At the moment it is holding up. People asked me how much influence you think the president is having on the Interest Rate decisions. Look, probably about 5 . These people are human and while they try to put their earmuffs on and ignore the president is saying every day it has some influence. The greater influence is what they are seeing in the economy and the markets. A stronger case would be there is more bullying from the markets going on right now than there is from the white house. Host michael from plainfield, illinois on the independent line. Good morning. Caller good morning. As a preamble to my question, my underequipped understanding is 70 of any economy is based on Consumer Spending. This is what i want to know. Im an older person, 69, a veteran, disabled. But i cant work. I would like to get a job but i just cant physically do it because of this the question becomes, i depend on the interest. Classically as you get older you move into fixed income. There is nowhere to move. The japanese tried to fix their problem in the 1980s by cutting Interest Rates that is zero. Did not work. It has taken them 40 years to unravel it. My question is, how can the is thearket rise when it only game in town . People are just really throwing good money after bad, smoke and mirrors, and where exactly is this going to end up . It has got to collapse because the jobs that are being created pay nothing. You cant live on a 12 an hour job. Can you please comment on that . Guest michael, you would make a great Federal Reserve reporter. You just articulated very well that there is a cost lowering Interest Rates. President trump makes it sound like this is free money and we should be lowering rates to spurn borrowing from consumers and companies. There is a cost of that. When you have too low Interest Rates, it does what you say. It spurs risky borrowing. Thats how we ended up with the. Com bubble. That is how we ended up with the housing bubble leading into 2008. What we saw on wednesday from the fed, two people dissented. A big part of the people they reason they did that was because they said there is a cost to having too low of Interest Rates and we dont want to spur bubbles that could be way more harmful later on. I dont think we are at that point right now but its a concern. Host john from silver spring, maryland on the democratic line. Good morning. Caller good morning. Are brilliant reporters about the economy, did anyone ask the fed about why hes doing what hes doing right now when the economy is doing well . It is a sad thing that the men who filed six times bankruptcy tried to run this business. It does not make any sense. Most of all i am not seeing any ands speaking up about this saying something to this president. You were going in the wrong direction. It is time for people to speak up. The farmers, the people in michigan who lost jobs as he promised he will create more jobs. What makes me very angry most of the time is him saying china will pay the tariff. We are paying for it. His is the economy hes doing Something Like this. It feels like a drunk guy driving the bus. If we dont speak up, we will have a bad economy. Host people tell us the economy is healthy. Why the rate cut . Guest great question. Is the question i be getting all week. I wrote an entire piece of that headline. If the economy is doing so well, why are we cutting Interest Rates . Here is what the fed argues. Its like getting an amortization shot. You are not sick yet but we see some signs all around us of starting to be problems in the economy. They want to head this off before they become really big problems. This is a preventative type measure, may be like when your parents tell the kids to drink more vitamin c during the winter to try to stave off colds. Host those backtoschool shots. Guest they call this preventative or insurance measures. Host are they pointing to anything that might become a problem for the economy or just saying in general are making sure nothing goes wrong . Guest the key thing now one of the callers made this point. 70 of the u. S. Economy is driven by Consumer Spending. You and i getting these people going out to buy stuff. We are good at buying things in the u. S. Host taxfree weekends. At thethe big concern Federal Reserves business been equally collapsed in the second quarter. It fell to. 6 , basically no business spending in this country. The concern is if businesses turnaround what is the next thing they are going to cut . The neck think they will potentially cut is hiring. If they cut hiring, thats fewer jobs and fewer people with paychex. That means fewer people spending. Thats the real concern that can truly think the economy, that Consumer Spending goes down and they want to prevent anything that could potentially get people out of work and those paychecks. Host jeff from florida. Caller good morning, everybody. How are you doing today . Guest great. Believe the fed cares about the economy and i figured instead ofy cut 10 , a few people getting raises, every one foot be a race and they would be a lot more spending the economy. In 2008 when the economy fell, it hurt a lot of people. Is what really caused the collapse of the economy. Thank you for your time. Guest a lot of good points. We just got the latest report card on the jobs on friday, just a few hours ago. If there isis that enough of a wage increase. The average Hourly Earnings are going of 3. 2 . That is well above inflation. Its one of the better rates we have seen in over a decade. The Economic Policy institute did a nice break down. Most of the increases are going to what i would consider the working class, people earning 12 to 14 an hour. They are seeing some of the highest increases right now. Thats a very positive step. Partly because of a good economy, partly because states voted to increase minimum wage. Host host lets talk to frank out of maryland on the democratic line. Good morning. Caller good morning. Youuld like to comment to comment on my strategy. I had to retire early. I have a small pension that isnt enough, so what i have been doing is taking my savings that im earning,. 15 , and living on my savings and putting off taking Social Security, which earns me about 7 per year, as opposed to 1. 15 per year. It i is that a good strategy . Guest im sure the Washington Post would like me to say i shouldnt be offering Financial Advice because im not a financial advisor, but many years ago, i used to be in the investment in visor e advisory profession, and i will holdhat if you are able to off taking Social Security another year or so, i would do that. My recommendation to you is shop around. 15 account and there are a lot of accounts that pay better. Off the top of my head, american express, a couple of online banks is offering it, hsbc, one of the foreign banks have been offering a rate above 2 . I would shop around on my savings account. Host lets talk to carl on the republican line. Morning. Good morning. Caller its tom, not carl. Host ok, tom, go ahead. Good under is it obama when he had low Interest Rates and bad under trump . Guest thats a great question. What we need to remember is a little higher Interest Rate is a sign of health in the economy, so Interest Rates, historically in this country, were close to 5 . At the moment, we are at 2. 5 . It as good ord bad or whats not. The goal, for years, has been to try to get Interest Rates away from zero, increase them back up the economy improves. What we have started to see, around 2014, is an improving economy that started under president obama and it continued under President Trump. I think what youre looking for is what is that sweet spot, like looking for the goldilocks level of Interest Rates. That is what the fed is trying to figure out right now. Almost everyone agrees zero is not where we want to be. 5 is probably not where we want to be, but where is cspans washington journal. Live every day. Campaign 2020. Numbers by democrats to boost turn out. With justin myers. Plus and editors sharing his views on campaign 2020. Podcast week. With larryk oconnor. Kuester willel join us. Wednesday, mark leon goldberg. Ewalt. Ay, chris stir on friday, jennifer briney. ToPresident Trump talked cspan this week about his presidency and agenda. Topics included his toughest today and office so far. Racism. Former advice from president s. And the 2020 president ial race. You can watch anytime online. In the free cspan radio at. When you are in a country transportation, to do anything you need the car. To function, drive this car, you need a map. Saudi arabian womens rights activists talks about her book daring to drive is, the right to an act of civil disobedience. A woman is not supposed to drive. We want to show that we are capable of eating in the drivers seat of our own destiny. At 8 00 sunday night eastern on cspans q a. Now, the South Carolina Republican Party annual silver elephant for him in columbia. An hour. Ust over is just over an hour