August 3, 2019

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The Fed Is Cutting Interest Rates. Why That Matters.

NPR’s Michel Martin speaks with economist and Federal Reserve historian Gary Richardson about the latest interest rate cuts.



MICHEL MARTIN, HOST:

Now we’re going to turn to this week’s other big economic news story – interest rate cuts. Earlier this week, the Federal Reserve cut interest rates for the first time in more than a decade. Federal Reserve Chairman Jerome Powell said the decision was made in light of slow global growth and trade tensions. The stock markets tumbled a bit, and President Trump complained the rate cut didn’t go far enough.

We wanted to talk more about this, especially the reaction to the rate cut and why it matters, so we’ve called Gary Richardson. He’s a professor of economics at the University of California, Irvine. He was also the historian for the Federal Reserve system from 2012 to 2016.

Professor Richardson, thank you so much for joining us.

GARY RICHARDSON: Thank you for having me on.

MARTIN: The cut itself was a bit of a haircut – you know, not that big of a change. But in a press conference after the decision, Federal Reserve Chairman Jerome Powell named weak global growth and trade tensions as some of the reasons behind the Fed’s decision. So is the significance of this less the rate cut itself the what it says about where the Fed thinks the economy’s going?

RICHARDSON: For sure that’s a big concern. The Federal Reserve has generally better information about the economy than most of the public, and they have a lot of experts there – they’re trying to predict the future. And the Fed is acting now as if we’re in a recession.

MARTIN: And why do you think the stock market reacted as it did?

RICHARDSON: Well, the signal I got from this is that the stock market is thinking that the Fed is telling us a recession is coming. There’s a lot of potential signals of recessions out there right now, and the Fed is acting as if we’re in a recession and taking the policies to counteract a recession. And I think a lot of people took note of that.

MARTIN: And at the same press conference, Chairman Powell said that we are in a, quote-unquote, “mid-cycle” adjustment. What does that mean?

RICHARDSON: It’s a new phrase. But basically, when they say the middle of the cycle, that means the peak of the cycle, right? The cycle goes up, and then it goes down. So they’re saying we’re kind of at the peak, and after the peak usually comes a contraction. So the question is, how long is the peak going to last, how long they can sustain the – kind of the peak of the boom before the economy shrinks.

MARTIN: I think there’s been a lot of talk about whether President Trump’s jawboning. I mean, he’s been complaining for some time now that he feels that the Fed isn’t doing enough to stimulate economic growth. Is his jawboning relevant here?

RICHARDSON: By law and not to the Federal Reserve, all presidents complain about the Fed, either in public or in private. Many have complained about the Federal Reserve much worse than Donald Trump. But Congress has told the Federal Reserve’s leadership and the Federal Open Market Committee, you must ignore that by law.

MARTIN: Well, that’s good to know, so thanks for clarifying that. So if people don’t follow economic news closely, what should they be paying attention to as this story continues?

RICHARDSON: If you’re thinking about refinancing your house, you might want to wait. The Federal Reserve is signaling potentially big problems, which usually means a series of rate cuts. For, like, businesses, there’s a bunch of things to be concerned about. One is the Fed is signaling they’re worried about the future. They might have information that a recession’s really here.

Another is that they may be signaling that they’ve changed policies. In the past, the Federal Reserve would wait to cut interest rates until they knew for sure we were in a recession. Now they’re cutting interest rates when we don’t – it’s not clear we’re in a recession. This could be a policy that leads to kind of more stability, right? If we’re – head off recessions. But also, it leads to a lot more risk. If the Federal Reserve stimulates the economy, but there’s not a recession, then the economy can get overheated, and the eventual contraction is going to be a lot worse.

MARTIN: That is Gary Richardson, former Federal Reserve System historian and professor of economics at the University of California, Irvine.

Professor Richardson, thank you so much for talking to us.

RICHARDSON: Oh, thank you. Hopefully it will be useful.

(SOUNDBITE OF ED SHEERAN’S “I SEE FIRE (KYGO REMIX)”)

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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Saturday Sports: Yankees And Red Sox, Concussions In Football

Scott Simon talks with Howard Bryant about the Red Sox and the Yankees battling this weekend, the Astros, and the death of an NFL great that’s renewing concern about concussions.



SCOTT SIMON, HOST:

And now it’s time for sports.

(SOUNDBITE OF MUSIC)

SIMON: The Bo Sox and the Yankees this weekend – great rivals wherever they sit in the standings – and the loss of a football great brings back concern over concussions. ESPN’s Howard Bryant joins us. Good morning, Howard.

HOWARD BRYANT: Good morning, Scott. How are you?

SIMON: I’m fine. Thanks, my friend.

BRYANT: (Laughter).

SIMON: Yeah – Cubs 6-2 in case you wondered – OK…

BRYANT: (Laughter).

SIMON: …Over Milwaukee yesterday. Yanks won 4-2 last night – doubleheader today. These two great teams are in the same division but, this, year kind of in different leagues, aren’t they?

BRYANT: Yeah. This one’s getting away from the Red Sox pretty quickly. They’re the defending champions. And they lost again last night. They lost their fifth in a row. They haven’t lost five in a row since 2015 July. And so you’re looking at a team right now that is going in the wrong direction, if you want to be a champion or even have a chance to to make the playoffs. You don’t want to get too far ahead of yourself in the first week of August because you’ve got two wildcard spots now. In the old days, they – 13 games out of first place in the lost column, and they would be over. But with two wild card spots, they can still make a run. But as Yogi Berra would say, it’s getting late early around here for the Red Sox.

SIMON: Major League trade deadline was Wednesday. And I want to know, coming up on an election year, why hasn’t the U.S. Congress passed a law to prevent the Houston Astros from acquiring yet another great starting pitcher?

BRYANT: Isn’t that great that we can actually talk about the Houston Astros having an embarrassment of riches considering that they hadn’t been a great team for about 45 years? And all of a sudden, the last few years, they have really done it the right way. They went out a couple of years ago and got Justin Verlander and won the World Series. And now this year, they may go out and get Zack Greinke. And so they’ve got the best pitching staff in baseball right now. They’ve got the best record in the American League. They’re right with the Dodgers with the best record in baseball. We might get a rematch of the 2017 World Series with the Dodgers and the Astros. You’ve got Verlander. You’ve got Gerrit Cole. And now you’ve got Zack Greinke. And there’s not a whole lot of pitching in the game right now anyway, as we know.

SIMON: Yeah.

BRYANT: So to have those three starters go up against anybody…

SIMON: I half-expect them to sign Sandy Koufax.

BRYANT: (Laughter) I bet you Sandy can still throw as well…

SIMON: Yeah.

BRYANT: …Because he always could. And it’s incredible, too, when you watch some of these teams, whether you’re looking at the Dodgers or the Red Sox or even the Yankees, these hundred-million-dollar teams, $200-million teams that didn’t make any moves. And then you see the Astros who just seem to have a way about them when it comes to going to the trade deadline. They went for it. And they’re going for another World Series.

SIMON: And we’ll note, they hit six home runs last night – 10-2 over Seattle. Nick Buoniconti died this week. He was 78, middle linebacker on two Super Bowl Miami Dolphin teams. He became a lawyer when he left football, an activist for medical research after his son Mark suffered a spinal cord injury playing college football. Nick Buoniconti was a smart, honorable good man. And he suffered dementia in recent years and said it was because he’d taken – and he estimated it – 520,000 hits to his head.

BRYANT: Yeah. And as a linebacker, when I heard that number, I was surprised that it was that low. You’re looking at every single play you’re making contact with your head. Every single play in football whether you’re looking at it from the pro level all the way down – this is the conversation, Scott, that we’ve been having for a really long time on this program, that the problem with football is football. And we keep talking about whether it’s possible to make it safer. You think about these end of life – the quality of life that these players have at a very – you know, 78’s a good run, obviously. But it’s not 80s or 90s. And so you’re looking at the price that a lot of the players are paying. I’m actually reading a book right now called “Brain Damage.” And it’s all about the price that parents have paid for the kids that they’ve lost playing football in some of these contact sports. And when you look at it, at some point, you do have to look at a – there’s a lawsuit with Pop Warner coming up next year.

SIMON: Yeah.

BRYANT: And at some point, football is sort of having a conversation about whether or not this sport can last.

SIMON: Howard Bryant, thanks so much – talk to you soon.

BRYANT: Thank you.

(SOUNDBITE OF TANGERINE DREAM’S “STRATOSFEAR”)

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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