Last week, the Federal Reserve unanimously decided to leave interest rates unchanged. This decision no doubt ran counter to the instincts of the US president, who has repeatedly called for immediate and sharp rate cuts. He justifies this stance by claiming that his intuition about the appropriate level of interest rates surpasses that of Fed Chair Jay Powell and his colleagues. Surprisingly, I am inclined to agree—at least in one respect.
Let me clarify: while the president may have strong intuition, the Fed possesses far superior knowledge of economic theory, a deeper understanding of the data, and vastly greater analytical capacity. These advantages far outweigh any intuitive edge the president might claim. Therefore, when it comes to monetary policy, I would place my trust in the Fed rather than the president—though, of course, the Fed is not infallible. And despite the attention-grabbing nature of this column’s title, neither is the president’s intuition.
The reality of political expediency is evident in the shifting stance of US leaders. During the 2016 election campaign, Donald Trump repeatedly argued that interest rates were too low, disadvantaging savers. At the time, some insisted that, once elected, Trump would pressure the Fed to raise rates. I was sceptical, noting that he would be the first president in my memory to advocate for higher interest rates while in office. Predictably, once in power, Trump became a vocal supporter of low rates—demonstrating the political opportunism inherent in policymaking.
Policy reversal in Brussels
The ability of politicians to shift positions is not confined to Washington. European policymakers have also shown a remarkable capacity to change course, as illustrated by European Commission President Ursula von der Leyen. Last year, she startled observers by proposing an ‘Omnibus’ to streamline regulation. Now, she has introduced a ‘competitiveness compass,’ setting a target to reduce corporate reporting obligations under various sustainability laws by 25 percent.
For years, I have argued that the proliferation of regulations and reporting requirements achieves little, incurs significant costs, and ultimately undermines prosperity. That stance has not exactly been a winning business model for me. If my goal were to maximise assignments as a consultant, I might have been better off enrolling in a ‘sustainability guru’ training course. But convictions matter—and one belief is not necessarily interchangeable with another.
While I am rarely surprised by European policymakers, von der Leyen’s pivot did catch me off guard. Having championed sweeping regulatory expansion in her first term, she now seeks to roll back some of those very measures. That is quite a reversal. To borrow a Dutch phrase, it almost made my trousers drop. But, as the saying goes, better halfway than not at all—so I quickly pulled them back up.
The battle ahead
The crucial question is whether this proposed deregulation will materialise. Reversing years of rulemaking will not be easy. Once an ecosystem of regulators, auditors, compliance officers, and enforcement agencies has been built, dismantling it is a formidable challenge. Many of these actors will resist change, as their roles depend on the status quo. Meanwhile, companies that have already invested heavily in compliance systems may be frustrated to learn that some of their efforts were unnecessary.
This debate risks becoming inward-looking, with stakeholders focusing on their existing roles rather than the bigger picture. The core issue—Europe’s competitiveness, on which current and future prosperity depends—must remain front and centre. I am hopeful, but then again, that is largely a matter of intuition.
Han de Jong is a former chief economist at ABN Amro. He writes weekly for Investment Officer on economics and markets. More of his insights can be found at Crystal Clear Economics.