WSJ Opinion: Potomac Watch Is Trumponomics Working, or Not?
Jul 31, 2025
Exploring the intricate landscape of the American economy, the discussion dives into the Federal Reserve's decision to maintain interest rates amid pressures for cuts. The impending tariff agreements raise questions about their potential impact on the sluggish economy. There’s a compelling dialogue on the intersection of economic policy and political narratives, especially regarding productivity and innovation in trade. The challenges of declining business investment and trade uncertainties offer a captivating glimpse into future economic dynamics.
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Business Investment Drops Due to Uncertainty
- Business investment plunged 3.1% in Q2, signaling reduced confidence in growth and hiring.
- This lack of investment is linked to uncertainty about trade policies and their economic impact.
Fed Holds Rates Amid Uncertainty
- The Fed waits to see tariffs' effect on inflation before cutting rates.
- Without recession signs or rising inflation to 2%, there's no current need to cut interest rates.
Tariffs: Economic vs Political Inflation
- The Fed uses tariffs as a political tool to explain inflation delays.
- Tariffs may cause a one-time price increase but not sustained inflation, confusing political perception.