Heresy Financial: The Fed’s Rationale for Rate Cuts

The Federal Reserve is currently operating under a monetary policy stance widely regarded as restrictive, a necessary measure, according to many, to fully contain inflation. But behind closed doors, a significant debate is brewing, fueled by newly appointed Fed Governor Steven Moran, who is advocating for a dramatic reversal. Moran argues that the current policy is excessively tight because the neutral interest rate ($r^{*}$)—the theoretical rate that neither stimulates nor restrains the economy—is far lower than current Fed rates. This clash of views isn’t just academic; it reflects deep underlying tensions in the U.S. economy, where fiscal reality is aggressively colliding…