Donald Trump has been complaining about the Fed's interest rate being too high going all the way back to his first term (perhaps even earlier). It's no secret that he wants Powell to drop rates to zero or near-zero.
The "glass half-full" among us will tell you this tariff stuff is all part of Trump's 3D-chess plan to refinance U.S. debt to a lower rate. Personally I doubt it. Everything he does is for himself, and it's only coincidence that sabotaging the economy to get rates to zero could benefit the National Debt.
Anyway, the tech hiring spree we saw in 2020-2021 was fed by rates being at or near zero. If money is free or nearly-free to borrow, why not hire everyone you can and try to grow your company as quickly as possible?
So in theory, bringing rates back down will ease companies' recession fears - not necessarily because they would think a recession isn't coming - no, I'm sure we will all still be expecting a recession "any day" - but with money very cheap or free to borrow, there's no risk to hiring people, starting new projects - because when shit hits the fan, there's negligible additional financial burden from that hiring/starting of new projects. Maybe 2% interest on the debt taken out to pay those people and start those projects. That might as well be 0% to a company, especially one that is FAANG-sized.
I've been saying for years now that the Fed dropping rates to 0% would solve the tech job market woes, and I still believe that. BUT- I make no guarantees against terrible side effects of dropping the interest rate back to zero. I think it will revive the tech job market... and cause many other, bad side-effects (including heightened inflation).
Everyone is hot to trot for AI, but these companies (even FAANG) are working at partial-capacity for developing AI-driven products because they're afraid to hire right before a recession. If they could hire and otherwise expand "for free" I think we would see another 2020-2021 from a tech hiring perspective. Things would be stupid again. You'd have more of the "I work at Google and do absolutely nothing", more instances of senior engineers pulling $250k base salaries... It would be a great time for SWEs, but probably at the detriment to everyone else via things like inflation.
The "glass half-full" among us will tell you this tariff stuff is all part of Trump's 3D-chess plan to refinance U.S. debt to a lower rate. Personally I doubt it. Everything he does is for himself, and it's only coincidence that sabotaging the economy to get rates to zero could benefit the National Debt.
Anyway, the tech hiring spree we saw in 2020-2021 was fed by rates being at or near zero. If money is free or nearly-free to borrow, why not hire everyone you can and try to grow your company as quickly as possible?
So in theory, bringing rates back down will ease companies' recession fears - not necessarily because they would think a recession isn't coming - no, I'm sure we will all still be expecting a recession "any day" - but with money very cheap or free to borrow, there's no risk to hiring people, starting new projects - because when shit hits the fan, there's negligible additional financial burden from that hiring/starting of new projects. Maybe 2% interest on the debt taken out to pay those people and start those projects. That might as well be 0% to a company, especially one that is FAANG-sized.
I've been saying for years now that the Fed dropping rates to 0% would solve the tech job market woes, and I still believe that. BUT- I make no guarantees against terrible side effects of dropping the interest rate back to zero. I think it will revive the tech job market... and cause many other, bad side-effects (including heightened inflation).
Everyone is hot to trot for AI, but these companies (even FAANG) are working at partial-capacity for developing AI-driven products because they're afraid to hire right before a recession. If they could hire and otherwise expand "for free" I think we would see another 2020-2021 from a tech hiring perspective. Things would be stupid again. You'd have more of the "I work at Google and do absolutely nothing", more instances of senior engineers pulling $250k base salaries... It would be a great time for SWEs, but probably at the detriment to everyone else via things like inflation.