Recently, Federal Reserve Chair Jerome Powell stated that the robust economy, low unemployment, strong consumer spending, and increased business investment provide room for the central bank to gradually lower interest rates.

In a speech delivered on Thursday in Dallas, Powell remarked, “The economy is not sending any signals that we need to be in a hurry to lower rates”. He noted that “the strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

According to The New York Times, the Fed is grappling with a complex moment. The economy remains generally healthy, but the job market has slowed over the past year. Inflation has also been steadily cooling. These two major trends have led central bank leaders to conclude that there is no longer a need to apply as much pressure to the economy.

In fact, after sharply raising interest rates in 2022 and 2023 to cool the economy and control rapid inflation, they have recently gradually started to reduce borrowing costs.

However, Fed officials are said to have the inflation fully suppressed in mind. Prices have cooled significantly from their peak in 2022, but have not yet fully returned to its 2% target. According to other recent data reports, in the year ending September, prices rose by 2.1%, with prices for October expected to be slightly higher than this level.

Therefore, based on the prevailing perspectives of the media and most American economists, Powell's repeated stance on monetary policy, specifically the decision to refrain from rate cuts, has its reason.

What I wish to highlight is the inherent contradiction in the Fed’s monetary policy under Powell. While Powell has consistently emphasized the need to maintain a "no rate cuts" stance, seemingly to assert the Fed's independence and resist external pressures, particularly from the Trump administration, the problem lies in its internal conflict. The Fed’s rationale for maintaining high interest rates is rooted in its focus on controlling inflation. Powell has reiterated that the Fed's policy objectives remain unchanged, with a steadfast commitment to curbing inflation. However, the paradox lies in the fact that keeping interest rates elevated is, in effect, counterproductive to reducing inflation. High interest rates do not ease inflationary pressures. Rather, they tend to solidify the current inflationary levels. This internal contradiction is a challenge that the Fed, under Powell’s leadership, cannot overlook.

As things stand, the inherent contradiction within the Fed's monetary policy suggests that Powell will ultimately be unable to withstand external pressures, including those from the Trump administration. As a result, the Fed is likely to lower interest rates in the near future.

At present, the Fed appears to be acting out of obstinacy. Before and following Trump's election, I made it clear that I would challenge the Fed’s economists on the issue of rate cuts to determine whether their position or mine would prevail. I remain convinced that both the Fed and Powell are making a fundamental error, and my view on this matter has not changed.