Fed policy rate is 50 bps too restrictive, says Ironsides Macroeconomics' Barry Knapp

• Barry Knapp recommends a 50 bps rate cut, setting the policy rate at 3%, to steepen the yield curve and improve small bank profitability and credit flow to small businesses.
• Knapp believes the current policy rate is too restrictive, while the balance sheet is too accommodative, and wants to rebalance monetary policy.
• Adam Posen argues monetary policy shouldn't target specific sectors and that loosening would worsen inflation, predicting future rate hikes in December 2026 and January 2027.
• Posen attributes small business struggles to policy uncertainty from the previous administration (trade, investment, regulatory, anti-migration policies), not tight monetary policy.

Two economists present opposing views on Federal Reserve monetary policy. Barry Knapp advocates for a 50 basis point rate cut to steepen the yield curve and ease credit for small banks and businesses. Adam Posen strongly opposes this, arguing against sector-specific bailouts and warning that loosening policy would exacerbate inflation, recommending a tightening bias or future rate hikes instead.