The Federal Open Market Committee (FOMC) is expected to leave its interest rate target unchanged at 3.5 to 3.75 percent at this week’s January meeting. After a series of rate cuts in the second half of last year, and a continued push for further easing, a pause may feel anticlimactic. But the leading monetary policy rules suggest another cut would be a mistake.

The latest Monetary Rules Report from AIER’s Sound Money Project shows that the Fed’s current policy rate now sits below the range suggested by several well-known rules. Most of the rules point to an appropriate policy rate somewhere between 3.85 and 4.25 percent, depending on how one weighs inflation, employment, and overall spending in the economy. In that context, additional rate cuts would go beyond what current economic conditions justify.

Why Stop Here?

Chair Jerome Powell has described the Fed’s recent rate cuts as “risk-management” moves — steps taken to guard against the possibility that a cooling labor market could tip into something worse. That framing made sense last year, when unemployment was drifting upward and the outlook for growth was more uncertain.

Since then, the economic picture has changed. Despite a continued slowdown in job creation, the unemployment rate in December was only slightly higher than in the first half of the year. More importantly, real GDP grew much faster than expected in the third quarter of 2025, as total spending in the economy rebounded sharply. At the same time, inflation remains above the Fed’s two-percent target, and progress toward that goal has been uneven.

The risks that motivated rate cuts last year have not disappeared, but they no longer justify continued risk-management through easier monetary policy.

What the Rules Say

Monetary policy rules provide a consistent way to translate economic conditions into interest-rate guidance, helping policymakers avoid overreacting to the latest headline or political mood.

Rules based on inflation and unemployment — often referred to as Taylor Rules — suggest that the policy rate should be closer to 4 percent. This prescription is based on a few key factors. First, inflation remains stuck persistently above the Fed’s two-percent target. When inflation is above target, the Taylor Rule calls for higher interest rates to slow demand and reduce upward pressure on prices. Second, the unemployment rate remains close to levels typically associated with maximum employment. When the labor market is near maximum employment, the Taylor Rule suggests there is little need for lower interest rates to boost economic activity. Third, strong growth and productivity have led to an increase in estimates of the “natural” rate of interest — the interest rate that is expected to prevail when the economy is at full strength and inflation is stable. When the natural rate rises, the Taylor rule calls for a similar increase in the prescribed policy rate.

Rules that focus on overall spending in the economy — often described as nominal GDP (or NGDP) targeting rules — call for an even higher policy rate. Total spending by households, businesses, and governments grew briskly in the third quarter of last year — over 8 percent on an annualized basis — signaling that monetary conditions are not especially tight. When spending accelerates that quickly, cutting rates further risks adding fuel to demand at a time when inflation has not yet been fully contained.

What This Means for Monetary Policy

Coming out of the pandemic, monetary policy swung sharply — first, staying too loose as inflation surged, then tightening aggressively to regain control. Episodes like these highlight the danger of letting policy stray from the data. Rule-based benchmarks help guard against that risk by keeping policy anchored to observable economic conditions.

Right now, those benchmarks are sending a clear signal: there is no urgency to do more. If anything, they indicate that the next interest rate move — if there is one at all — should be up rather than down. While a reversal at this meeting is unlikely, the Fed’s internal debate should be about whether to regret the last 25-basis-point cut, not whether to cut even further.

That does not mean the Fed should ignore downside risks. Weak job growth, consumer spending increasingly driven by high-income households, and open questions about how long the AI investment boom will last are all legitimate concerns that should be monitored. At the same time, new jobless claims are near historical lows, growth forecasts are strongly positive, and the stock market is at record highs. Ultimately, monetary policy should not be driven by headlines in either direction. The Fed’s mandate is to promote maximum employment and stable prices. If unemployment rises, inflation falls convincingly toward target, or growth slows, the case for continued easing would strengthen. Absent those developments, further rate cuts are difficult to justify.

Looking Ahead

In the years immediately following the pandemic, monetary policy drifted away from the guidance offered by the leading monetary rules. Over the past year, the Federal Reserve has largely worked its way back toward those benchmarks, bringing the stance of policy closer to what prevailing economic conditions would suggest. That course correction has helped restore some measure of predictability and discipline to monetary policy.

The challenge at the start of 2026 is to maintain that discipline. Markets increasingly expect further rate cuts and there is political pressure to deliver on those expectations. But the greater risk now is repeating a familiar mistake: allowing policy to once again drift away from the signals embedded in the data. Absent clear signs of economic weakness, further easing risks undoing the discipline that has brought policy back on track.

Late last year, YouTube announced plans to reinstate accounts that had been banned at the behest of the Biden Administration for posting alleged COVID-19 misinformation. The announcement likely came as a relief to groups like the Children’s Health Defense Fund, a group associated with Robert Kennedy Jr.; and to Senator Ron Johnson; both of whom were punished by the social media giant for posting videos that ran contrary to the Biden administration’s official policy on the COVID-19 vaccine and on COVID-19 treatments.

This is a good move. But we should remember, it wasn’t just YouTube that decided to punish speech disapproved by the prior administration. 

A report by the United States House of Representatives’ Committee on the Judiciary and Select Subcommittee on the Weaponization of the Federal Government contains damning evidence that the Biden Administration leaned on social media companies to censor anti-vaccine content during the COVID-19 pandemic. The report details how Facebook, Amazon, and YouTube all shadowbanned or removed content that was critical of the administration’s official stance on the vaccines, the origin of the virus, and more.

The administration’s actions were reckless, and endangered more than just our societal freedom of speech.

For one thing, while it might be tempting to think that the Biden Administration only censored crackpots and conspiracy theorists, the truth is far worse. The report details how the Biden administration leaned on Facebook to censor the “lab leak” theory of COVID-19’s origins, a theory that’s now seen as highly plausible. It similarly asked Facebook to censor “negative information on or opinions about the vaccine,” and internal emails from Facebook report that ““The Surgeon General wants us to remove true information about side effects.”

Prominent scientists who opposed the administration’s position on lockdowns, including Dr. Jay Bhattacharya (current head of the National Institutes of Health) were blacklisted by social media platforms. At the administration’s behest, videos featuring Bhattacharya were removed from YouTube.

All of this did immense damage to our truth-seeking apparatus, during a time when finding the truth could not have been more important. When Facebook dragged its feet on censoring certain content, President Biden publicly accused them of “killing people.” But the same accusation could be made against the Biden Administration itself: by censoring scientific debate during a once-in-a-lifetime pandemic, the administration virtually guaranteed that its response would be worse than if prominent critics were allowed to voice their concerns.

Some proponents of censorship argue that the more important an issue is, the more justification there is for censorship. This makes a superficial kind of sense: after all, nobody wants hucksters selling snake oil to take advantage of sick people by claiming that they’re curing cancer. But more often, the inverse is true: the higher the stakes of a given issue, the more essential it is that experts on all sides be allowed to voice their concerns freely. By preventing this robust scientific debate, the Biden administration ensured that the policies it implemented (including lockdowns and vaccine mandates) were worse than if prominent critics had been given a seat at the table.

The Biden Administration’s actions also took a sledgehammer to institutional trust in America, which has fallen to concerning levels. The decline of institutional trust worries critics across the political spectrum, from progressives concerned that our society is becoming anti-science to conservatives like Yuval Levin, for a simple reason: our society works better when we trust our institutions and when, in turn, they show themselves to be trustworthy.

By politicizing the scientific debate about the COVID-19 pandemic, the Biden Administration did profound damage to institutional trust. A study by Pew finds that in April 2020, 87 percent of Americans “had confidence in scientists to act in the public’s best interests.” By late 2023, that number had fallen to 73 percent. By summer of 2024, the Centers for Disease Control and Prevention had only a 33 percent approval rating among Republicans. Many on the left chalk this trend up to Republicans being anti-science, but the House Judiciary report tells a different story: many on the right lost trust in an institution that they justifiably saw as having been shamelessly politicized.

Trust in news has plummeted as well. In 2019, 18 percent of Americans had a “great deal” or “quite a lot” of faith in television news. By 2024, that number had fallen to 12 percent. In 2019, 23 percent of respondents had a “great deal” or “quite a lot” of faith in newspapers; by 2024, that number was just 18 percent. There are multiple reasons for this decline in trust, but it’s hard to see evidence of the administration jawboning companies into censoring so-called “misinformation” on COVID-19 and not conclude that many Americans are simply tired of feeling lied to by the news.

The other problem created by the administration has to do with what economist Robert Higgs calls the “ratchet effect.” Here’s how Michael Matulef describes the phenomenon:

The ratchet effect theory, as popularized by Robert Higgs in his book Crisis and Leviathan, refers to the tendency of governments to respond to crises by implementing new policies, regulations, and laws that significantly enhance their powers. These measures are typically presented as temporary solutions to address specific problems. However, in history, these measures often outlast their intended purpose and become a permanent part of the legal landscape.

One danger of the Biden Administration’s actions is that they can become precedents for future administrations to further erode free speech protections in future crises. The Biden administration inured people to having their freedom of speech censored in the name of public health, which makes it that much more likely that we’ll be equally willing to shrug off future abuses. When it comes to free speech, we the people can feel like the proverbial frog sitting in a pot of increasingly hot water, and it should concern all of us whenever an administration decides to increase the temperature by a few degrees.

When we’re discussing freedom of speech, First Amendment defenders can be strident about the principles involved; as more than one First Amendment absolutist has argued, even if there were no practical benefit to free speech beyond letting people speak freely, it would still be worth defending. 

That’s true, but we shouldn’t let ourselves forget that the First Amendment is also a profoundly practical tool for building a good society. When governments censor their people, they do profound damage to the truth-seeking apparatus and risk people’s lives and livelihoods with poorly-thought-out policies. They damage the institutional trust that keeps society functioning. No matter what we think of the arguments made by lockdown resistors and COVID-19 vaccine skeptics, we should be appalled that our government tried to censor them.

David Beito argues that Franklin Delano Roosevelt was a self-serving politician who cared very little for the civil liberties of Americans. In FDR: A New Political Life, Beito challenges historians who explain away Roosevelt’s horrid record on civil rights as politically strategic (in the case of black Americans) or as an exception (in the case of Japanese internment).

Instead, Beito contends that FDR’s glib view of civil liberties was core to his worldview. Additionally, Beito emphasizes that Roosevelt’s economic policies were ineffective and at times counterproductive, and that his reliance on top-down solutions to the Great Depression violated the economic liberties of Americans. In short, FDR was the worst president on individual liberty since Woodrow Wilson, and he might have been even worse.

Beito begins by recounting Roosevelt’s actions as Assistant Secretary of the Navy under Wilson. FDR “gave unquestioning support” to Wilson’s attack on free speech and expression during the conflict and demonstrated no “strong ideological commitments to the Bill of Rights.” During the notorious white violence against black Americans during the “Red Summer” of 1919, Roosevelt did nothing as white sailors attacked black streetcar passengers. The violence spread to 26 cities and when the NAACP demanded that the sailors and marines be arrested, FDR and the rest of the Wilson administration initially did nothing. Writing to a Harvard classmate, FDR joked, “With your experience in handling Africans in Arkansas, I think you had better come here and take charge of the police force.” 

In addition to his lack of a response to the racial violence of 1919, Roosevelt also played an active role in the Newport Sex Scandal. There were reports that there were “perverts” at the Newport Naval base and Ervin Arnold, a chief petty officer, began an investigation using entrapment as a tool to root out homosexual activity. Lacking funds, Arnold’s violation of the sailors’ dignity and civil liberties might have ended, but Roosevelt “almost single-handedly saved the investigation” by pushing his superiors to create Section A (nicknamed the Newport Sex Squad) to continue looking into the matter.

Roosevelt believed that “homosexuality was immoral and he would expend every effort to ferret out offenders.” Section A used “heavy-handed tactics” that “soon backfired” and led to “public backlash.” FDR ultimately had to testify and defend the methods of the investigation. On the stand, he “denied any knowledge that his investigators had engaged in same-sex acts to obtain evidence.” To which the judge skeptically inquired, “How did you think evidence of unnatural crimes could be obtained?” Humiliated, Roosevelt responded simply, “I didn’t think.” 

Beito uses FDR’s time in the Wilson administration to demonstrate that his indifference to the plight of black Americans and his support for mass internment of Japanese Americans were not aberrations but rather the fulfillment of Roosevelt’s worldview. He did not care about American civil liberties. The Senate Committee of Naval Affairs issued a stunning rebuke of FDR following its investigation of the Newport scandal. It asserted that Roosevelt’s office had violated “the moral code of the American citizen, and the rights of every American boy who enlisted in the Navy to fight for his country.” Further, it found FDR “morally responsible” for entrapment and the other “immoral acts” and came to the conclusion that he “must have known” the methods that were being used by the investigation. 

Beito also demonstrates how Roosevelt came of age and was influenced by an intellectual climate that was sympathetic to central planning and social control. His later penchant for top-down economic solutions was a product of “the spread of progressive ideas all around him.” Drawing on the work of historian Daniel T. Rodgers, Beito explains that much of this progressivism was coming from Germany where Bismarck’s emphasis on “paternalism and military-style efficiency” had captured the imaginations of American students who studied abroad. They brought back with them “German-inspired policies” such as “compulsory insurance, public housing, and zoning.” For his part, Roosevelt praised Germany because it had moved “beyond the liberty of the individual to do as he pleased with his own property and found it was necessary to check this liberty for the benefit of the freedom of the whole people.” Far from being the pragmatist that most historians cast Roosevelt as, Beito argues that he bathed in progressive waters and concluded early in his political career that American society needed to be “centered on cooperation rather than excessive competition.” 

Beito shows that FDR harbored racist views of both Jews and Japanese Americans and infers that these contributed to the president’s poor treatment of both groups. The story of Japanese internment is well documented, and Roosevelt is beginning to get the blame that he deserves for that gross violation of justice. Beito’s discussion of FDR’s treatment of potential Jewish refugees, however, is newer and demonstrates a further dimension of his bigotry. As Nazi atrocities against German Jews began to surface in the mid-1930s, Roosevelt did nothing to help them migrate to the United States. Following Kristallnacht, his State Department rejected the United Kingdom’s willingness “to donate the unused capacity of its quota so the US could admit sixty thousand more German Jews.”

Further, FDR rejected calls from Secretary of Labor Frances Perkins “to admit the maximum combined quota for the next three years (82,000 in all).” Most tragically, when the German liner, the SS St. Louis, arrived off the coast of Florida carrying over 900 Jewish refugees, the administration not only did not admit them, the Coast Guard ensured that none of the refugees would be able to swim to freedom. Even after evidence of mass genocide in Europe reached Roosevelt, “the administration’s stance toward refugees showed no sign of shifting.” Beito concludes that “while FDR and his advisors certainly viewed the Nazis as international gangsters, the plight of the Jews was never a priority.” 

For those focused on FDR’s economic policy, Beito agrees that the New Deal was ineffective and even counterproductive for bringing about economic recovery. He condemns the National Recovery Administration, the Federal Housing Administration, the Wagner Act, and the Agricultural Adjustment Administration for harming black Americans. Beito argues that Roosevelt created massive amounts of uncertainty that prevented economic recovery and did so by embracing a corporatism that emulated fascist Italy and Nazi Germany. Even in areas where FDR is sometimes praised, such as his emphasis in encouraging more international trade, Beito demonstrates how progress sometimes came in spite of the president rather than because of him. In fact, Beito details how Roosevelt undermined the efforts of Cordell Hull to expand trade and reduce tariffs. 

Finally, Beito challenges the narrative that FDR was a great wartime leader. In contrast, he depicts Roosevelt as prolonging the war with his insistence on “unconditional surrender.” Beito argues that the rigidity of these terms led the Nazis and the Japanese to fight on when they might have laid down their arms. He concludes that “after the US entered the war, the president’s rigid stand for unconditional surrender worsened the destructive nature of the conflict.”

In making his case against FDR, Beito marshals evidence from his numerous publications, including his previous book The New Deal’s War on the Bill of Rights. The result is a magnificently researched narrative that also serves as an introduction to numerous topics that Beito has long studied, including mutual aid societies, self-help organizations, the tax revolt of the 1920s, and more.

In a sense, FDR: A New Political Life feels like the crescendo of all the work that came before it. The book is a damning portrayal of America’s thirty-second president.

Beito ultimately concludes that “FDR was a failed president primarily because he repeatedly put his considerable abilities at the service of far less laudable goals, including a ruthless preoccupation with personal and political advancement, self-defeating economic policies, and the erection of a vast and unaccountable centralized federal bureaucracy.” This short biography is worth the read, even for those who are well acquainted with Roosevelt’s shortcomings. Beito has produced the most accessible and comprehensive critical account of FDR to date.