Following the U.S. Federal Reserve's recent decision to cut interest rates in half, some Republicans suggested that the decision was politically motivated to give Vice President Kamala Harris an edge in the presidential election campaign.
Some believed the interest rate cut was timed to improve the economy and give the current administration an advantage. I'm proud of Fed Chairman Mickey Bowman for refuting Jay Powell. Our central bank has no right to change interest rates this close to an election and is clearly trying to tip the scales in Kamala Harris' favor.
But according to an article by Paul Krugman in Thursday's New York Times (NYT), that idea is wrong.
Paul Krugman is an influential American economist known for his scholarly achievements and intellectual role. Born in 1953, Krugman has had a long and distinguished career, winning the Nobel Prize in Economics in 2008 for his pioneering work in international trade theory and economic geography. His research helps explain the complex structure of trade by demonstrating how economies of scale and consumer preferences shape global markets. He received his BA in economics from Yale University and his PhD from the Massachusetts Institute of Technology. He has taught at Yale University, MIT, and Princeton University, where he was a professor for over 15 years. He is currently Professor Emeritus at Princeton University and also teaches at the #City University of New York.
Krugman recognizes that while the rate cut may not seem significant from a practical standpoint: the federal funds rate fell from 5.5% to 5%, it has symbolic significance: the Fed's decision shows that inflation, which had been a major concern, is now under control. and that the Fed's decision is a sign that inflation, which had been a major concern, is now under control.
Krugman emphasizes that the Fed's statement is important because it reassures the public and investors that the U. S. economy is stabilizing. However, Krugman strongly rejects the notion that the move is politically motivated.
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