by Casey Quinlan, Wisconsin Examiner
September 19, 2024
The Federal Reserve’s first key interest rate cut in four years coincides with another major four-year event: the homestretch of the presidential election.
Fed Chair Jerome Powell downplayed the central bank’s role in the race between Vice President Kamala Harris and former President Donald Trump on Wednesday, in announcing the half-percentage point cut in its benchmark rate. But that didn’t stop the candidates’ campaigns from weighing in, and it could prove a key factor for voters.
“This is my fourth presidential election at the Fed, and it’s always the same. We’re always going to this meeting in particular and asking what’s the right thing to do for the people we serve,” Powell said. “Nothing else is ever discussed.”
The decision to cut for the first time during the Biden Administration indicates the Federal Reserve’s Board of Governors believe the economy has beaten the COVID-19 pandemic-induced wave of inflation that has plagued it since mid-2021. The Fed hiked its key rate 11 times between March 2022 and July 2023.
Inflation peaked at 9.1% in June 2022. The Consumer Price Index, a measure of inflation, rose 2.5% over the past year, according to the latest release from the Bureau of Labor Statistics in August. The unemployment rate was 4.2% in August, down from 4.3% in July, but still much higher than 3.5% in July 2023 when the Fed made its last rate hike.
“We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks of both sides of our dual mandate,” Powell said.
Wednesday’s was the first in what is expected to be a series of key rate cuts. For now, that benchmark rate is 4.75 to 5%
One member of the Fed’s governing board, Michelle Bowman, dissented with the rest of the group, marking the first time a governor has done so since 2005. Bowman preferred a 25 basis point – or quarter percentage point – cut.
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