During a campaign event in Raleigh, North Carolina, this week, a reporter was booed by the crowd after asking vice presidential candidate JD Vance about the recent move by the Federal Reserve to cut interest rates.  Recently, reporters have been continually booed by Trump supporters for asking questions or touting narratives that they vehemently disagree with.

Suggesting that the reduction in interest rates would “alleviate inflation” for many Americans, even though rate cuts are expansionary monetary policy that inherently spurs economic activity, the reporter asked for Vance to weigh in on the matter.  The crowd obviously disagreed with this narrative, immediately booing the reporter’s assertion.

“Really quickly, just on the Fed cutting, it’s a very Wall Street Journally question, but the Fed cut the interest rate today by a half a percentage point, going to alleviate inflation for a lot of people. And so if you have any reaction to that?” the reporter asked Vance off camera.  “Look my my my reaction is…” Vance, pausing to allow the booing to subside.

Trump’s running mate then suggested that the move would do little to mitigate the persistent inflation that has plagued American consumers throughout the Biden-Harris administration.  “My, my, my reaction is, a half a point is nothing compared to what American families have been dealing with for the last three years,” he said, to which the crowd loudly cheered.

Users on social media pointed out that, based on economic principles, it is counterintuitive to suggest that lower interest rates would improve inflation.  The Federal Reserve considers cutting interest rates when the economy is slowing in an attempt to prevent a recession, caused the contraction in economic activity caused by the previous increase in rates to combat inflation.

In this case, the Fed decreased rates to engineer a highly anticipated soft landing after fighting price increases with elevated interest rates throughout the Biden administration. While a rate cut may lead to an immediate decrease in borrowing costs on debt instruments, it spurs business investment across the broader economy leading to higher demand and increased prices in theory.

Citing these economic principles, one person on X noted, “I’m kind of confused what was meant by the reporter here. Increasing rates reduces inflation whereas cutting typically does not. Incidentally, the FED did a great job and tamed inflation well enough to a point that cutting made sense.”

Another person similarly wrote, “Pro: Immediate Impact on Borrowing Costs: Lowering the prime rate makes borrowing cheaper for banks, which often translates into lower interest rates for consumers and businesses. This can encourage spending and investment, potentially leading to an increase in demand for goods and services. If demand outpaces supply, this could contribute to inflation.”

They continued, “Lower interest rates can lead to more money in circulation. If this increased liquidity leads to higher consumer spending without a corresponding increase in productivity or supply, inflation could rise. However, if the economy was previously in a deflationary or low inflation state, this rate cut might help stabilize prices or even boost deflationary pressures if it signals economic weakness.”

Watch Vance below:

Note: The featured image is a screenshot from the embedded video.