Mike’s Musings: It’s Time for the Fed to Lower Interest Rates – Before It’s Too Late

The Federal Reserve has done its job. Inflation, which recently reached its highest point in forty years, has gradually moderated. The labor market, while still resilient, shows signs of softening. Consumer confidence is shaky, small businesses are tightening their belts, and borrowing costs are squeezing everything from mortgages to car loans to credit card payments. It’s time for the Fed to recognize the changing landscape and begin lowering interest rates.
The Fed’s core mission is twofold: ensure price stability and maximize employment. Over the last two years, the focus was rightly on inflation, which spiraled in the wake of pandemic-related supply shocks, massive stimulus, and surging demand. But now, inflation has fallen to near the Fed’s 2% target. The argument for continuing high rates is growing weaker by the month.
Meanwhile, the damage from high interest rates is becoming harder to ignore. Homebuyers are sidelined, unable to afford mortgage payments with rates hovering around 7%. Builders are pulling back. Small businesses—many of which are the lifeblood of rural communities and small towns like those across Michigan—are finding it harder to access affordable credit. Consumer debt is rising sharply, with delinquencies creeping up.
Even Wall Street, often a cheerleader for higher rates when inflation runs hot, is now signaling concern that the Fed is holding rates too high for too long. Market volatility, slowed investment, and nervous forecasts are flashing yellow lights. The longer rates stay elevated, the more likely it is that we’ll tip from a soft landing into a full-blown recession.
The global picture adds another layer. Europe is cutting rates. Canada is easing. China is struggling with deflation. If the U.S. stands pat, we risk a stronger dollar, weaker exports, and global imbalances that could undercut American manufacturing and farming—industries that are already under pressure from foreign competition and rising input costs.
Some Fed officials argue that rate cuts should wait until inflation is “sustainably” at 2%. But that target was never meant to be a red line, it’s an average. Insisting on hitting it precisely before making any move is like refusing to take your foot off the brake until your car comes to a dead stop, even as traffic speeds away.
Then there is the dreaded fear of tariffs, and what they will do to the economy. Federal Reserve Chair Jerome Powell, who many are calling for his resignation, has said he wants to wait and see what the effects of tariffs are on the economy. However, we’ve had tariffs for several months with very little effect. That excuse is no longer valid.
There’s also a political dimension here. The Fed is supposed to be independent, and it must avoid being seen as playing favorites in an election year. Some say lowering interest rates prior to the 2024 presidential election was just that, a political move to help the Democratic ticket. But staying on the sidelines out of fear of perception is just as dangerous as acting too soon. Doing the right thing—based on data, not optics—should always come first.
It’s time for a shift in thinking. Holding rates high when inflation has cooled is no longer sound monetary policy—it’s economic self-harm. The Fed should start easing before economic momentum stalls completely. A gradual, measured rate-cutting cycle would send the right message to markets, to households, and to businesses: that the worst is behind us, and that America is ready to grow again.
The Federal Reserve has shown great courage in the past. Now it must show wisdom. The data is in. The economy is cooling. The pressure is real. Lower the rates. Let America breathe again.