A combined file photo of US Vice President Kamala Harris in Milwaukee, Wisconsin, USA, on August 20, 2024, and former US President Donald Trump in Bedminster, New Jersey, USA, on August 15, 2024.
Marco Bello | Gina Moon | Reuters
Federal Reserve System Fed Chair Jerome Powell suggested Wednesday’s larger-than-expected rate cut may have limited impact on Vice President Kamala Harris and President Donald Trump’s presidential campaign because the effects of the decision will ripple through the economy slowly.
“Our actions almost always have a delayed effect on economic conditions,” Powell said at a news conference, responding to a reporter’s question about the timing of the long-awaited rate cut, just 48 days until the Nov. 5 election.
The Federal Reserve said on Wednesday it was cutting interest rates by 50 basis points (0.5 percentage points), the first rate cut since March 2020 and a milestone in the post-pandemic U.S. economic recovery.
The rate cut comes at the end of the Trump-Harris battle, but Powell said the Fed was focused on the interests of consumers and made the decision “without any other filter.”
“This is my fourth term as chairman of the Federal Reserve, and it’s always the same,” Powell said. “We always come to this meeting, especially, asking what is the right thing to do for the people that we serve.”
Federal Reserve Chairman Jerome Powell speaks at a press conference after the Federal Open Market Committee’s two-day meeting on interest rate policy in Washington, US, September 18, 2024.
Tom Brenner | Reuters
Despite efforts by the Federal Reserve to separate its highly anticipated decision from political context, the rate cut quickly became a political battle after it was announced.
The Biden administration saw the rate cut announcement as a victory march for the president’s economic policies.
“We’re at a critical moment. Inflation and interest rates are falling, and the economy is still going strong.” President Joe Biden “Critics said it couldn’t happen, but our policies are lowering costs and creating jobs,” X wrote in a post after the announcement.
Harris’ campaign used the rate cut as an opportunity to double down on the Democratic presidential candidate’s economic agenda.
“This announcement is good news for Americans who have borne the brunt of rising prices, but I remain focused on our efforts to keep prices lower,” Harris said in a statement Wednesday.
Meanwhile, President Trump has turned the rate cut into an attack on the Biden-Harris administration’s economic record, suggesting the Fed may have cut rates for political reasons.
“Assuming they’re not just playing politics, I think that a cut this big is an indication that the economy is in very bad shape,” Trump said during a surprise visit to a bitcoin-themed bar in New York. “It was a big cut.”
During his first term, Trump frequently criticized Chairman Powell, breaking with the White House’s practice of refraining from commenting on the Fed’s actions in order to maintain the Fed’s political independence. As he seeks a second term, Trump has signaled he wants a formal say in Fed decision-making.
With national polls showing voters repeatedly citing the rising cost of living as their top issue, both Harris and Trump are trying to portray themselves as the candidates best placed to revive the U.S. economy.
The pandemic has caused inflation to soar to its highest level in 40 years, making groceries, housing, gas, and other everyday expenses more expensive for American consumers. To cool the economy, the Fed began raising interest rates in March 2022, further squeezing consumer budgets.
This economic pain has made rising prices a top priority for voters during this election cycle and, as a result, a major focus for both Democrats and Republicans.
