Former Fed Board candidate Judy Shelton went on TV to assess the current state of the U.S. economy and make critical predictions about the next Fed meeting.
Mr. Shelton also strongly supported White House Economic Council Director Kevin Hassett’s candidacy for Federal Reserve Chairman.
Shelton said a rate cut is “almost inevitable” at next Wednesday’s Fed meeting. Shelton noted that the 32,000 private sector job losses were of particular concern and stressed the importance of personal consumption expenditure (PCE) data being in line with expectations.
Shelton said that if the inflation numbers had been higher, it could have given more influence to hawkish members of the Fed who “want to keep interest rates restrictive.” But Shelton said the rate cut was warranted, noting that small businesses in particular are currently being squeezed by loan interest rates of 8% to 12%, which is hindering growth.
The show also questioned White House Economic Council Director Kevin Hassett’s comments that the U.S. economy has entered a “historic golden age.” Hassett predicted that increased demand from tax breaks on tips, overtime and Social Security payments, as well as efficiencies brought about by artificial intelligence, would stimulate the economy.
Judy Shelton said she “100% agrees” with Hassett’s views. Citing Treasury Secretary Scott Bessant’s definition of “shared prosperity,” Shelton said we are entering an era in which the financial and real sectors benefit together, with growth likely to approach 4%.
Asked for his thoughts on President Trump’s nomination of Kevin Hassett to be the next Fed chairman, Shelton praised his colleague.
“Kevin Hassett is an excellent economist and I think he’s a great choice,” Shelton said. Mr. Shelton emphasized that Mr. Hassett’s belief in the Trump administration’s “supply-side economics” policies (tax cuts, deregulation, smart energy and trade policies) was critical, noting Mr. Hassett’s keen understanding of the anti-inflationary effects of these policies and the importance of access to capital.
Finally, Shelton addressed concerns about AI-related layoffs, stressing that foreign investment and new manufacturing companies will require workforce resources. He added that he was optimistic that productivity gains from technology could improve long-term employment prospects.
*This is not investment advice.
