While the case for rate cuts cannot be dismissed out of hand, I’m inclined to think that Powell and his colleagues are right to hold off for now.

Trump called for lower interest rates during his last presidency and is again calling for lower interest rates. Last time around, he called the Federal Reserve chairman he appointed, Jerome Powell, an “enemy of the people”; this time, he is calling him “a real dummy.” I guess Powell is rising in his estimation?

Sometimes Trump has been right in calling for a looser monetary policy. I think he was right for much of 2018 and 2019. And the case that the Fed should cut interest rates now, as Trump wants, is getting stronger. Inflation has been slowly dropping and unemployment rates slowly climbing.

But core inflation has still been running too high: During the last six months, core PCE inflation has been 2.6 percent. That’s above the Fed’s 2 percent target. And with inflation having been significantly above target for the last few years and the economy still probably expanding, it would be preferable to be a bit below 2 percent. Some measures of expected inflation are too high as well.

The Trump administration’s case for rate cuts also undercuts itself. David Malpass, although not serving in the administration, fleshed out this case in a recent op-ed. If it’s really the case that Trump’s policies are “transforming the economy for the better” and making “growth prospects improve,” then the natural or neutral rate of interest should be climbing. And if it is, then monetary policy is already loosening just because the Fed isn’t raising the target interest rate alongside it.

All in all: While the case for rate cuts cannot be dismissed out of hand, I’m inclined to think that Powell and his colleagues are right to hold off for now. The real dummy has the better of the argument.