Anyone who has regular income is affected by interest rates and if you are a consumer and have to pay interest, you want low rates. If you to keep inflation to manageable levels, you may want interest rates to be higher. It is an age-old dilemma that every once in a while, makes the headlines because politicians like low rates. The dilemma has been partially solved by insuring the Federal Reserve or Fed board of directors who vote on the decision is reasonably independent of the political cycle. The Chair of the Fed is a fixed term, the President of the US cannot fire him, the term has to run out.

In an article from the Associated Press, the term of the Fed Reserve Chair is coming to an end in May of 2026 and the President has the ability to appoint a new Chair. Normally, those in the financial industry are more entuned to the decision, however President Trump decided long time ago he wanted low interest rates and has made the Fed Reserve decision a public policy interest. At the moment there are many with an opinion.

The President teased out that he is looking at 4 names including Kevin Hassett, director of the National Economic Council (you may have seen him doing interviews on the Sunday News programs), Kevin Warsh, a former member of the Federal Reserve Board of Governors and 2 others.

In the economy what is good for individuals is not necessarily good for the overall economy. As an individual, it is wonderful to live within your means and have little or no debt. However, in the economy in general, 60% plus is based on people spending money and having access to credit, hopefully at reasonable rates, to maintain a functioning economy. The Fed tries to determine the balance to fight inflation. The other example is if your wages go up, that is a good thing, but if everyone goes up, prices will have to go up to pay for the increases which leads to inflation.

Linking to dividend paying stocks, all economies depend on government workers trying to be reasonably independent to offset what politicians want. If the politicians get what they want, they tend to want to spend money particularly a year before they are going to the polls so they can say because of me these funds have been allocated to this area. Recently we have seen politicians vote against a bill which passed but ultimately benefits their district and take credit for the allocation of resources. Independence is important to a functioning economy or eventually there will be money lost by the average consumer.

There are more questions than answers, till the next time – to raising questions.