Rate Cuts to Boost Jobs Will Only Fuel More Inflation Chaos

Federal Reserve Governor Christopher Waller dropped a truth bomb recently, warning that rising unemployment and layoffs could trigger rate cuts. The labor market, once a pillar of post-pandemic recovery, is showing cracks. Unemployment hit 4.2% in March 2025, the highest in over a year, with job growth slowing to a mere 143,000 in January. This isn’t just a blip; it’s a warning. The Fed’s obsession with tweaking employment levels is steering us toward a cliff, and it’s time to hit the brakes on their overreach.

Waller’s comments cut through the noise. He sees the writing on the wall: more layoffs are coming, and the Fed’s itching to pull the rate-cut lever. But here’s the problem. Every time the Fed tries to play hero with monetary policy, it risks fueling inflation or propping up asset bubbles that don’t help the average worker. The labor market’s cooling, sure, but the answer isn’t flooding the economy with cheap money. It’s letting markets do what they do best: adjust, innovate, and create jobs without bureaucrats meddling.

The Fed’s dual mandate—price stability and full employment—sounds noble, but it’s a recipe for distortion. Employment isn’t a dial you can turn without consequences. When policymakers in Washington prioritize job numbers over price stability, they plant the seeds for inflation, stagflation, or worse. The Conference Board’s leading economic indicators are flashing red, with bankruptcy inquiries spiking and consumer sentiment tanking. We’re not in a recession yet, but the risk is real, and the Fed’s fixation on unemployment isn’t helping.

Conservatives have long warned about this. Project 2025, a bold policy roadmap, calls for stripping the Fed of its employment mandate and even questions its role in money management. The argument is simple: markets, not central planners, should drive job creation. The Fed’s track record—think quantitative easing that juiced Wall Street while Main Street struggled—proves the point. It’s time to rethink this system before it drags us into another economic mess.

The Fed’s current framework, tweaked in 2020, is a case study in good intentions gone wrong. It prioritizes employment shortfalls, meaning it’s quick to ease policy when jobs falter but slow to act when inflation spikes. This lopsided approach delayed the Fed’s response to the 2021-2022 inflation surge, leaving consumers grappling with soaring prices. Now, with unemployment creeping up, the Fed’s itching to repeat the cycle. Waller’s comments suggest they’re ready to cut rates if layoffs accelerate, but at what cost?

Historical data backs the skepticism. A 1% change in the federal funds rate can nudge unemployment by 0.3%, but the effect lags and depends on business confidence. Right now, confidence is shaky, with tariffs on China, Canada, and Mexico raising costs and chilling investment. Cutting rates might juice hiring temporarily, but it also risks reigniting inflation, which the Fed’s own forecasts peg as a persistent threat. The Phillips curve, once a darling of economic theory, shows this tradeoff is shaky at best. Long-term, unemployment settles at its natural rate, no matter how much the Fed tinkers.

Advocates for the Fed’s dual mandate, often found in left-leaning circles, argue that prioritizing jobs promotes equity and shared prosperity. They point to gains in reducing racial and economic disparities as proof. But this ignores the collateral damage. Easy money fuels asset bubbles, widens wealth gaps, and hits fixed-income retirees hardest. The Paycheck Protection Program, a targeted fiscal tool, did more for jobs during the pandemic than years of quantitative easing. Markets, not mandates, deliver sustainable growth.

Consumer behavior tells the real story. Household debt has ballooned to $17.94 trillion, with credit card balances at $1.21 trillion. Delinquencies are creeping up, especially among lower-income households battered by high food prices. Spending on necessities holds steady, but discretionary purchases are plummeting. The University of Michigan’s consumer sentiment index dropped nearly 10% in February, signaling fear about the future. If unemployment keeps rising, this financial strain will only worsen, and no amount of rate cuts will fix it.

The conservative answer is clear: let markets lead. Deregulation, low taxes, and pro-business policies under President Trump’s second term are already setting the stage for job creation. The labor market’s bifurcation—less-educated workers thriving while college-educated ones struggle—shows that targeted policies, not broad monetary strokes, work best. The Fed should focus on what it’s good at: keeping inflation in check. A strict inflation target, as conservatives propose, would anchor expectations and prevent the boom-bust cycles we’ve seen too often.

History supports this. During the Great Depression, massive government spending didn’t end unemployment; market adjustments and private enterprise did. The Fed’s role should be to ensure price stability, not to play jobs czar. Proposals like free banking or strict monetary rules, while bold, highlight a truth: central planning doesn’t create prosperity. Businesses, freed from red tape and empowered by confidence, do.

Opponents, often policymakers tied to big-government solutions, claim the Fed’s inclusive employment goals are vital for marginalized communities. They argue that rate hikes hurt workers and widen inequality. But this assumes the Fed can fine-tune outcomes without side effects. Inflation, fueled by loose policy, hits low-income households hardest, eroding wages and savings. The Fed’s own data shows that prolonged easy money benefits asset markets, not the broader economy. The real path to equity is a strong, market-driven labor market, not artificial stimulus.

The Fed stands at a crossroads. Waller’s warning about unemployment and layoffs is a chance to rethink its approach. Cutting rates might feel like a quick fix, but it’s a gamble that could reignite inflation and deepen economic woes. The labor market’s cooling, with layoff notices up 5% and jobless claims hovering at 215,000, demands a steady hand, not a panic button. Conservatives know the answer lies in markets, not mandates. Policies that unleash business investment and reward innovation will do more for jobs than any rate cut.

President Trump’s economic agenda, focused on deregulation and trade strength, offers a blueprint. The Fed should step back, focus on price stability, and let the market work its magic. Americans deserve an economy driven by opportunity, not one propped up by central bankers chasing outdated goals. The warning signs—rising debt, falling sentiment, and a 36-40% recession risk—are clear. It’s time to choose markets over meddling, before the Fed’s next misstep sends us all tumbling.