- US President Joe Biden said he’s unaware of the Federal Reserve’s next move following the recent inflation data but ensured interest rate cuts would happen this year.
- Interest rates have remained untouched at 5.25%-5.50% since July last year.
Official Statement of US President Joe Biden on Inflation and Rate Cuts
The Bureau of Labor and Statistics (BLS) just released its latest Consumer Price Index (CPI) report on Wednesday, and it’s certainly not looking well for people expecting interest rate cuts by June. Now, President Joe Biden has aired the same level of uncertainty as to where the Federal Reserve may be heading next.
According to the US chief executive, the recent inflation data displaying a staggering 3.8% increase in core inflation and a 3.5% rise in headline inflation will certainly impact the upcoming Federal Open Market Committee (FOMC) meetings. However, the 81-year-old president cleared out that he is currently in the dark about the next move of the US central bank. Nevertheless, he assured the public that interest rate cuts would happen before year-end.
Fed Chair Jerome Powell on the Next Rate Cuts
Fed Chairman Jerome Powell has always stood his ground on the subject of interest rate cuts. For him, the opportune moment is when they “have greater confidence that inflation is moving sustainably down” along the 2% range to ensure a soft landing. In economics, a soft landing is basically a scenario where inflation is quelled by the central bank without triggering a recession.
The current interest rates of 5.25%-5.50% have stagnated since July 2023. Despite that, Powell is optimistic that inflation will eventually cool down and revive talks on rate cuts to aid businesses.
How will Rate Cuts Play in the Next Election?
Analysts are throwing in the idea that several rate cuts will occur as the 2024 US Presidential Election nears. The $3.6 trillion asset manager State Street even projected that the Fed may proceed with a 50 basis points reduction by June followed by a string of cuts to bring down the rates to a total of 150 basis points before year-end.
While interest rate cuts may seem to favor the incumbent president, this may also prove to be a risky move moving forward. Since he took the seat, Biden and his cohorts have been criticized for their handling of the economy. Therefore, some analysts think a sudden interest rate cut wouldn’t be enough to change the public’s sentiment. The gamble may be costly, too, because it could catalyze an economic shock if the prevailing conditions do not call for it.
On the other hand, the lower cost of borrowing may allow companies to boost their assets, which may help drive up employment. This could potentially provide a last-minute accomplishment and reinforcement to Biden’s bid for another term in the White House.
It remains to be seen how the Feds will play their cards since one of the forerunners in the race, former President Donald Trump, has already made it clear that he wouldn’t be reinstating the central bank’s present chair if he wins the election.