Why former CEA chair Jason Furman says he would vote against a rate cut

Core Viewpoint - The market anticipates a third quarter point cut in the last Federal Reserve meeting of the year, with odds at 91%, but there is a belief that this easing is a mistake due to inflation remaining above target [1]. Group 1: Inflation and Fiscal Policy - Inflation was largely driven by fiscal policies in 2021 and 2022, and it continues to be influenced by ongoing large budget deficits [3][7]. - The budget deficit is expected to increase over the next year, necessitating the Fed to counteract expansionary demand policies more aggressively than it did in 2021 [4]. - The current inflation rate is a percentage point above the target, while the unemployment rate is only slightly above its target, indicating a need for the Fed to maintain focus on inflation [7][8]. Group 2: Interest Rates and Economic Conditions - There is a call for higher long-term interest rates to counteract inflation and the AI bubble, which would require a shift in market expectations regarding short-term rate cuts [4][5]. - The government must reduce its budget deficit to facilitate lower interest rates for consumers and small businesses [6]. - Expansionary fiscal policy combined with rising asset prices creates a demand-heavy environment, complicating the inflation situation [7]. Group 3: Consumer Sentiment and Government Actions - Despite lower gas prices, consumer sentiment remains poor, highlighting a disconnect between economic indicators and public perception [9]. - The President has made claims about combating inflation and improving affordability, but there are suggestions that reducing tariffs could be a more effective tool for making goods more affordable [10][11]. - The current trade attitude is viewed as detrimental, with calls for the government to reverse tariffs that contribute to rising goods prices [12].