Soon: Fed to Announce Whether It's Cutting Interest Rates as Trump Continues Pressure
KATE BOLDUAN, CNN ANCHOR: Will they? Won't they? And what happened last night? It's decision time for the Federal Reserve. Chairman Jay Powell is expected to end the speculation today on whether the Feds will cut the interest rates. This will be the second time in two months. Despite this, he is still under intense pressure from the president of the United States. President Trump constantly hitting the chairman that he appointed, a reminder, to the post. On Monday, he said that Jay Powell and the Feds don't have a clue. He has also called them boneheaded. Joining me, another bonehead, Rana Foroohar.</s>RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Hey!</s>BOLDUAN: I don't know why, it's such a good term to use. Under appreciated and under used. OK. Rana, so on this, it does seem at this point like it would be more of a surprise if the Fed chairman would not, would keep interest rates the same.</s>FOROOHAR: Yes.</s>BOLDUAN: What are you, though, listening for after the fact that could be more important even when an announcement comes?</s>FOROOHAR: I am listening to two things. One was alluded to by Chairman Jay Powell. He said a couple of weeks ago in his speech, look, he was flying blind here. He didn't use that exact term thank god. But he more or less said there's no precedent for where we are today. So it's possible that we could see a rate cut and it would buoy the market a little bit. It's possible we could see a rate cuts and stocks would be flat or fall and markets would start to get worried, oh, wow, we're at the end of the fire power here that the Fed has, what else is in the kitty? The answer is nothing. It's also possible that you could see them hold and not cut rates and that would, in turn, scare markets. Because right now, and I have been saying this for years, the markets are totally dependent on the Fed action. I think we're at the end of a growth cycle. I think we're close to what would be a normal recessionary period. I know that sounds scary. There are cycles in the economy.</s>BOLDUAN: Right.</s>FOROOHAR: It's natural to get a slowdown sometimes. We're kind of at that point. That's why everyone is so jittery.</s>BOLDUAN: Jay Powell is between a rock and a hard place.</s>BOLDUAN: Quickly, a couple things. The president called for negative interest rates. Not that that would be the announcement, but what would that do?</s>FOROOHAR: We've seen it in Japan. They've had negative interest rates. It penalizes savers. It makes it hard for people saving money because you are not earning interest on that money. It penalizes older people on pensions, on fixed incomes. It would be good for corporate debt, which may be one of the reasons he wants it. He wants corporations to continue to take on debt, for the markets to stay up. But overall, in the economy, I don't think it's a great thing.</s>BOLDUAN: So then there's this, Rana. Something happened overnight that is raising alarm. The New York Fed launched what's called an overnight repo operation, which sounds very scary to respond --</s>FOROOHAR: Yes. Overnight operations are never very good. I've got news for you.</s>BOLDUAN: To respond to a spike in overnight borrowing rates. This is something, most folks, me included, know very little about. I do know this has not happened since the last financial crisis. So what's behind this?</s>FOROOHAR: A lot of nervousness. What you need to know is, is this repo action basically speaks to the trust banks have in each other, institution have in each other. Right now, there's a lot of worry in the market that there's something hiding. Whenever debt goes up, which has gone up tremendously in the last 10 years, it covers a lot of problems. We're at the end of the cycle where debt can cover problems. Everyone is wondering, where is the exploding package of debt going to be. So borrowing rates between banks are going up. That's what the Feds are trying to cover. I think I will be back here in the next few weeks talking to you about some major market movements.</s>BOLDUAN: Oh, great. Whenever Rana says that --</s>BOLDUAN: -- I'm a little excited and a lot nervous. Thank you, Rana. I really appreciate it.</s>FOROOHAR: Thank you.</s>BOLDUAN: OK. Let's see what Jay Powell says later this afternoon. Still ahead for us, a major blow to almost 50,000 G.M. workers who are on strike. Next, why the company is denying health care coverage for striking union members. And how the Democratic presidential candidates are making an issue of it. We'll be right back.