Maintaining a strong economy is the challenge
Keeping economic growth going can be tougher than kick-starting it in the first place. With the nation’s unemployment rate at historic lows — better than ever for some segments of the workforce — the challenge now is to maintain the pace.
Most Federal Reserve Board members recognize that. A few days ago, they voted to reduce interest rates by a quarter-point. That should help keep up the momentum.
Critics disagree. They fear that lower interest rates will overheat the economy, leading to high rates of inflation. By reducing the purchasing power of Americans’ paychecks, that would be undesirable.
Others fear lower interest rates would spur us to pile up more debt. That is a valid concern, but it is unlikely a quarter-point interest rate cut will result in a rush to borrow money.
As far as inflation goes, it simply is not a problem. The rate last year was a manageable 2.44 percent. This year’s rate averages 1.75 percent.
Since 2017, the purchasing power of a dollar has not decreased much. It now costs about $1.05 to buy the same things that cost $1 in 2017.
Federal Reserve officials have been cautious in tinkering with the economy, and that itself has drawn some criticism. But moderate intervention such as the recent half-point interest rate cut seems like a rational step to keep the hard-charging economy from bogging down.