Former World Bank President and Purdue University School of Business International Finance Expert David Malpass criticized the FED’s interest rate policy on the Squawk Box program he attended on CNBC.
Malpass said the Fed’s interest rates are “still too high” and are holding back growth in the U.S. economy.
Malpass criticized Fed Chairman Jerome Powell’s statement that Trump’s tariffs had raised inflation expectations and delayed interest rate cuts. Malpass described Powell’s assessment, made in Europe, as “contextual but distracting,” adding, “The real problem is that the Fed is still keeping interest rates too high.”
Stating that the European Central Bank prefers low growth, Malpass stated that this approach is not suitable for the US:
“The entire economy cannot be run on the principle of ‘let’s not overheat.’ That’s bad for the middle class and small businesses.”
Malpass argued that Trump’s proposal to not tax tips was a step in the right direction to support the working class.
The program also brought up the compromise bill that would extend Trump’s tax cuts. Former Treasury Secretaries Robert Rubin and Larry Summers’ article titled “This Bill Is Dangerous” was recalled. Malpass said he disagreed with these criticisms:
“If this law is not passed, there will be a tax increase. This will have a negative impact on growth. Rubin and Summers’ proposals are from the 1990s. Today’s conditions are different.”
Malpass responded to criticism that the bill would add an additional $3.3 trillion to the budget as follows:
“These numbers are static models that assume the tax cuts are not extended and have no impact on growth. That is not the reality. The U.S. economy could grow much faster.”
Malpass argued that the anti-growth economic models used by the Fed must change. “Everyone in Washington is focused on growing the government. That mentality has to end,” he said.
*This is not investment advice.
