The uncertainty of the prospect of the Federal Reserve's interest rate cut has not only caused great waves in the market, forcing a group of investors to reassess risks, but also had an impact on US politics.
The interest rate futures market now shows that the first expected rate cut by investors is most likely to occur at the Federal Reserve meeting from September 17th to 18th, but some Wall Street institutions predict that the Fed may only be able to launch rate cuts later this year.
The latest prediction from Bank of America economists is that the Federal Reserve will only be able to gain the confidence needed to lower interest rates in December. And this means that the interest rate cut will be later than the November US presidential election, which is undoubtedly a bolt from the blue for Biden, who hopes to gain voter support through loose policies.
Biden himself also emphasized after Wednesday's US inflation report that although he is not clear about the specific decision-making process of the Federal Reserve, he insists on predicting that the Federal Reserve will adopt a rate cut policy this year. Inflation has dropped from 9% to nearly 3%, which means his government is much better than his predecessor (Trump).
And this response has made many people watch the excitement, mocking whether it can be considered a presidential intervention in the independence of the Federal Reserve.
The Federal Reserve in the General Election
The strong US Consumer Price Index in March has made the inflation situation tricky, and has also prompted more and more Federal Reserve officials to publicly state that they will no longer adhere to the outlook of three rate cuts this year and will not adjust interest rates in the short term.
The current feeling among Federal Reserve observers is that the Fed may completely miss out on the entire US presidential election cycle, which is very unfavorable for Biden, as both the ruling government and the ruling party usually gain economic approval from voters due to interest rate cuts. This also means that Biden will be repeatedly questioned for his ineffective response to inflation throughout this year's campaign.
More dramatically, during Trump's tenure as President of the United States, Biden directly criticized Trump for calling on the Federal Reserve to cut interest rates, stating that the President should not pressure the Federal Reserve, as this is a comprehensive abuse of power that he would never do if he were the President.
However, now that the board has returned to him, it is obvious that Biden has not been able to stop talking. The White House also urgently patched Biden's "optimistic remarks", arguing that Biden was not interfering with Federal Reserve decisions, but rather expressing his "personal opinion.".
But there are still those who mercilessly mock that someone should have unplugged Biden's microphone wire, otherwise he will further point out how much "independence" the Federal Reserve has.
The Federal Reserve, on the other hand, is doing its best to shape its image as far away from politics, insisting that its policy decisions are completely detached from political concerns or influence, and neither Trump nor Biden can change their thinking.
However, this is not important for Trump, but rather a win-win situation. From his campaign propaganda, the Fed's failure to cut interest rates represents Biden's weakness and incompetence in economic governance; The Fed's interest rate cut represents the White House's interference in the Fed's independent decision-making, disregarding the dangerous economic situation.
In short, the Federal Reserve can no longer escape the vortex of the US election.