The Federal Reserve on Wednesday cut interest rates by half a percentage point. And Federal Reserve Chairman Jerome Powell made an interesting Freudian Slip in the announcement: “We concluded that this was the right thing for the economy and the
people we serve,” the Chairman said.
In talking about "the people we serve" most of the media assumed Powell was referring to the central bank’s decision to cut interest rates by half a point in response to the latest upward tick in the unemployment rate. However, being cynics and knowing Powell's politics, we figure the "people we serve" is Kamala Harris and the Democratic Party.
After all, Senator Elizabeth Warren (D-MA) and other Democrat lawmakers had called on Powell to cut rates more aggressively, urging the Fed in a letter to reduce its benchmark federal funds rate by three-quarters of a percentage point.
The Fed then started lifting interest rates in earnest in March 2022, as inflation took off thanks to the Harris-Biden Democrats’ spending spree. By that summer, they were making a series of jumbo rate increases that would ultimately take borrowing costs to the 5.33 percent they stood on Tuesday, the highest in more than 20 years.
That policy put buying a home, a new car or starting a small business out of reach for many, if not most, Americans. But it didn’t hobble Communist China’s efforts to suck vast amounts of American capital out of Wall Street. Meaning for the past four years the Fed has been managing the economy on the backs of America's working families.
And it is worth noting that in July 2019, at the height of the Trump economic boom, the benchmark rate was a range of two percent to 2.25 percent – about half of the cost of borrowing today.
But with unemployment rising and Wall Street jittery the Fed had to do something to give Kamala Harris’s campaign a boost – the question is will this be enough to overcome the public perception the economy is in the tank and push Harris over the top?
Our friends at the Committee to Unleash Prosperity seem doubtful. In a recent issue of their must-read Hotline they said, “The good news for investors is that a rate cut is coming tomorrow. The bad news: it won't fix the underlying structural economic problems of runaway government spending and debt and the threat of economically debilitating tax increases.”
And as editors of the CTUP Hotline observed, while inflation has finally subsided for now, it is at the cost to American families of a 20% permanent rise in the price level. If Washington wants to stimulate economic growth, it should cut TAX rates, not interest rates. Money creation doesn't create prosperity, the writers at CTUP reminded us.
What’s more, with the election less than two months away we doubt that this interest rate cut will reemploy those who have lost jobs or reassure those who feel their job is in jeopardy.
Unemployment has risen 1.4 million since Dec. 2022 and as our friend Robert Romano, Vice President of Public Policy at Americans for Limited Government Foundation observed in a recent article for the organization’s Daily Torch newsletter, “…much of the unemployment still remains on the horizon, no matter who wins the election in November between Vice President Kamala Harris and former President Donald Trump. Even with Powell’s projections that the U.S. economy is “strong” relative to other economies, what matters to American households is just how bad will the downturn in labor markets be, just how high will unemployment really go and when and therefore how bad the pain is.”
The bottom line?
It sure looks to us like Powell led the Fed to cut interest rates to help Kamala Harris, the good news is it is very likely too late to have an effect on this year’s election.
2024 Election
Federal Reserve rate cut
Biden Harris agenda
Federal Reserve Chairman Jerome Powell
Home sales
inflation
interest rates
Wall Street
unemployment
Continuing Budget Resolution
Democrat spending
omnibus spending bill
climate policies
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