Fed Rate Cut Likely This Week But Will Be "Hawkish" At Best

The Federal Reserve has stood firm in its refusal to cut interest rates, even amid fair calls to cut them. Yet the agency is steadfast in making sure inflation comes down to its goal of two percent. Of course, some of the refusal to cut has been some political gamesmanship between chair Jerome Powell and President Trump. But for the most part, the refusal to cut rates, while questionable, has been backed up by the numbers.

The Fed once again meets this week for their September meeting, and rate cuts will once again be the only thing on people's minds. It is likely the Fed will cut rates this time around, but do not expect it to be big. At best, it will be a "hawkish" cut and in reality, it might not be the best move just yet.

Economist Joel Griffith says with inflation still riding high, and numbers from August showing a little bit of a spike in inflation, a cut right now is not the right move.

"They should also be continuing to speed up the draw down of their balance sheet," he says. "That is a big reason why we keep dealing with high inflation rates."

The Federal Reserve balance sheet would make one's head explode. The number of things in cost that the Fed pays for is insane on a dollar scale, but when you factor in the rampant overspending the government has done, it is no wonder we are in debt.

It is almost a self-perpetuating mechanism. The government has issues. The government overspends. The government runs out of money because the economy tanks. The government prints money. The economy tanks. The government has issues. They overspend. It is a vicious cycle we have yet to break.

"Without government spending about nine percent more this year than last year, and our deficit growing by about eight percent...there will be more pressure put on the fed to print dollars to buy government debt...that is very dangerous," says Griffith.

In theory, Trump's tariffs will help pay down that debt drastically. But due to lawfare, and some countries playing hardball, the full effect of those has yet to take shape.

So, it is really a waiting game right now. Because the Fed cannot keep printing money, and the government still has budget issues to hash out.

"Those borrowed dollars either have to come from the private sector, or from the printing presses at the federal reserve...that is what truly sparks inflation," Griffith says.

Their meeting is set to begin on Tuesday.