The Fed's rate cuts are already reverberating in the 2024 presidential campaign, with Democrat Harris praising the move as a boon for middle-class families and Republican Trump suggesting the Fed's rate cuts may be politically motivated.
Federal Reserve Chairman Jerome Powell has pledged not to let political pressure influence the central bank's decision-making with just seven weeks until Election Day and the 2024 presidential campaign about to begin.
The competing narratives also underscore the extent to which the economy and interest rates have quickly become a campaign focus, with both parties seeking to use the initiative to bolster their electoral positions.
Former U.S. President Donald Trump said the Federal Reserve's decision to cut its benchmark interest rate by 50 basis points showed the U.S. economy was "very bad" or that the Fed was "playing politics."
“I think if they weren’t playing politics, a rate cut of that magnitude would indicate a very bad economy,” the Republican presidential candidate told reporters. “Either the economy is bad or they’re playing politics, one or the other. But this is a big rate cut.”
Harris, for her part, framed the decision in a statement as "especially welcome news for Americans burdened by high prices." Her statement exposed how inflation is a major political liability for her, hitting American families hard and leaving voters frustrated with Biden's handling of the economy.
“I know that prices remain too high for many middle-class and working families, and my first priority as president will be to lower the cost of everyday items like health care, housing and food,” Harris added, trying to draw a contrast with Trump’s agenda.
Biden also praised the move as marking an "important moment in the fight against inflation." "Inflation and interest rates are falling, and the economy remains strong," he said in a statement. "Critics say it can't happen - but our policies are lowering costs and creating jobs." Biden said he would discuss the matter further on Thursday.
Trump’s latest intervention is not the first time he has criticized Powell or accused the independent central bank of acting politically.
In an interview with Bloomberg this summer, Trump warned Powell against cutting rates before the election but said if he were re-elected to the White House for another four years, he would let Powell continue as Fed chairman for the rest of his term if he "did the right thing."
In a February interview with Fox Business, Trump said he wanted to replace Powell and accused him of "politicizing" and predicted he would cut rates to "help the Democrats."
Powell, widely respected on Wall Street for his leadership of the Fed, is a Republican who worked at the U.S. Treasury during the George H.W. Bush administration before moving into investment banking and later becoming a partner at the Carlyle Group.
Although Trump nominated Powell to the Fed chair in 2017, during his tenure, Trump repeatedly attacked him for not lowering interest rates amid the trade war he launched at the time. At one point, Trump questioned whether the Fed chairman was a bigger enemy of the United States.
Trump supporters also slammed the Fed for adjusting rates so close to the November election, with hedge fund billionaire John Paulson, a major donor to Republican presidential candidates and a possible future Treasury secretary if Trump returns to office, saying he believed the Fed should "stay out of presidential politics."
"The Fed traditionally does not cut rates so close to an election, and the only time it did so this century was after the 2008 financial crisis, when decisive action was needed. We are not in a similar situation today," Paulson said in a statement. "This decision raises questions about whether its timing was intended to boost Vice President Harris' campaign. The Fed claims to be above politics, but the timing of today's action casts doubt on that claim."
The criticism echoed Trump's own swipes at the Fed and raised concerns about whether Trump would intensify pressure on the central bank if he wins the election.
Powell's current term as Fed chairman ends in 2026, and he was reappointed by Biden in 2021. Powell said as recently as this summer that he intends to serve the remainder of his term.
Trump has previously accused the Fed of working against him, criticizing then-Fed Chair Janet Yellen in 2016 for keeping interest rates low during his presidential campaign against Democrat Hillary Clinton.
Trump has suggested in recent weeks that the president should have more of a say in how the Fed handles interest rates and monetary policy, a move that would upend the central bank’s long tradition of independence from political forces.
Trump isn't the only administration official pressuring the Fed over its rate decision, though. Three prominent Democratic senators on Monday called on Powell to cut rates by 75 basis points this week.
Pennsylvania Rep. Brandon Boyle, the top Democrat on the House Budget Committee, said on Wednesday that the Fed's decision to cut interest rates was a victory for the middle class and praised the central bank for making "significant progress on inflation."
Polls show that most voters remain deeply concerned about inflation and the cost of living, despite a decline in recent months. The latest FT-Michigan Ross poll found that four in five voters cite rising prices as one of their biggest sources of financial stress.
The article is forwarded from: Jinshi Data
