An interesting point in American monetary policy. Senior Treasury Advisor Lavorgna recently publicly called on the Fed to continue lowering interest rates, and there's a reason for that. Amid moderate inflation and concerns about the sustainability of economic growth, such a stance makes sense.

Looking at the data — core PCE inflation is approaching the target range, but at the same time, the manufacturing sector is sending mixed signals. The ISM Manufacturing Index has remained below expansionary levels for several months. Employment has slowed down, though it hasn't fallen into critical territory. This combination creates what economists call a 'policy window' for adjustment.

Why is this important? Because if the Fed waits too long, it might miss the moment. History shows — in 1995-1996 and 2019, the central bank made preemptive rate cuts when signs of growth were still present. This helped avoid a worse scenario.

But here’s the complexity. The transmission mechanisms of monetary policy are now working differently than before. Banks have become more cautious with their lending, corporations are reducing debt instead of investing. The traditional link between Fed rates and the real economy has weakened. Global synchronization — several central banks have already shifted to a dovish policy, affecting capital flows.

Regarding the markets — it will be interesting to observe. The yield curve is likely to flatten, rate-sensitive stocks will get support, the dollar will weaken. Credit spreads will narrow. But this raises questions about financial stability — the value of bank reserves, as they say, depends on how prudently the central bank balances supporting growth and preventing excesses.

Lavorgna’s stance reflects real economic conditions, not just theory. Consumers are still spending, but cautiously. Global headwinds are blowing against the US. The Federal Reserve faces a complex task — it’s independent, but such recommendations from the Treasury provide valuable context for understanding how the situation is developing.

In my opinion, 2025 has become a turning point for monetary policy, and we are still feeling the effects of these decisions. It will be interesting to see how everything unfolds further.