The Federal Reserve’s Open Market committee will meet again this week to determine what the Federal Funds Rate should be. Most economists and nearly all of Wall Street expect the Fed to cut interest rates by another 25 basis points. The question is why.

Recall in June 2022, the Fed finally realized that price stability was their primary policy goal. The Fed forgot about that goal from January 2021 to June 2022 when they kept interest rates near zero and continued their massive, although eventually scaled down, bond buying program. That policy coupled with the massive federal government spending deficits and the restrictions on the supply of energy, caused inflation to skyrocket.

Not since the early 1980s had the US seen inflation of more than 4% for any extended period.  In fact, for the entire 21^st century, annual inflation as measured by the Consumer Price Index, was mostly in the 2% to 2 ½% range. At the end of 2020 inflation was 1.4%.

Because of the misguided Monetary, Fiscal and Energy Policies inflation soared to 9.1%.  But in June 2022 the Fed began a year long policy to aggressively raise interest rates to bring inflation down. They stopped raising interest prematurely after July 2023.

That allowed inflation to linger into 2024.

Then, strangely, the Fed started to cut interest rates in September of this year. More strangely they cut interest rates again in November. Most strangely, the Fed will cut interest rates this week.  It is simple to see why these rates cut actions are so strange.

Interest rate reductions are warranted when the economy is not growing, and the unemployment rate is increasing. So, if economic growth was near zero or if the unemployment rate was over 5%, the Fed should recognize that their second goal is to set policy that stimulates growth and leads to a full employment economy.

In September, the economy was growing at about a 3% rate. That is evidenced by noting GDP growth in the second quarter of this year was 3% and was nearly 3% in the third quarter.  Most economists are forecasting about 3% growth for the current quarter.

With growth that high and inflation still not down to 2%, which is the Fed’s goal, there is no reason to cut interest rates to stimulate the economy.

Unemployment, which spiked during the pandemic shutdown to double digit levels, had steadily fallen to under 4%.  In July of this year, the rate was 4.2%, and it is at that level today. Any economist will tell you that 4% is the level of unemployment that represents a full employment economy. That means there is no reason to cut interest rates.

In fact, the interest rate cuts in September, November and likely December are counterproductive. Those rate cuts appear to be putting upward pressure on prices.

The CPI gain from August to October was 0.2% per month. In November it increased to 0.3%, raising the annual inflation rate to 2.7%.  Remember the Fed’s stated goal is 2%.  While one month is certainly not a trend, the direction is disturbing.

This data means that the Fed has no reason to cut interest rates this week.

The Fed is somewhat lucky that the inflation rate is below 3% today. If it wasn’t for weak demand in the energy market mostly caused by the weak economies in China, Japan and some European countries, inflation as measured by the CPI would be 3.3%. That’s well above the Fed’s target.

Jerome Powell says he will not leave his position as Chair of the Fed until his term expires in May 2026. That means the country is stuck with a chair who has made numerous incorrect Monetary Policy decisions starting in 2018 when he raised interest rates for no reason.

Then came the mistakes of January 2021 to January 2022 when he held interest rates near zero which fueled inflation. Then there was the mistake after July 2023 when he prematurely stopped raising interest rates. Then more mistakes in late 2024 when he cut interest rates.

Jerome Powell will be remembered in the same way that history remembers Aurther Burns who was Fed chair in the 1970s. Burns did virtually nothing to end the severe inflation problem that lasted nearly a decade.

Powell’s inflation will enter its fifth year in 2025.

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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.