(Singapore, 19th September 2024) Donald Trump has said the Federal Reserve’s decision to cut its benchmark interest rate by 0.5% on yesterday showed the US economy was either “very bad” or the central bank was “playing politics.”
“I guess it shows the economy is very bad to cut it by that much, assuming that they are not just playing politics,” Donald Trump told reporters at a stop at a Manhattan bitcoin bar on Wednesday. “The economy would be very bad, or they are playing politics, one or the other. But it was a big cut.”
In a separate interview with Fox Business Network in 2024 February, Trump indicated he wanted to replace Jerome Powell, Chair of the Federal Reserve of the United States and accused him of being “political”, predicting he would cut interest rates to “help the Democrats”.
Some economists agree that the rate cut might help the Democrats. According to the news analysis of the Washington Post on September 18, 2024, Mark Zandi, chief economist at Moody’s Analytics said, “The rate cut, which will be the start of a series of rate cuts, is an economic tailwind behind the Harris campaign for sure.” Mark Zandi added that “It’s not just about the symbolism — it’s also about the real effects. It’s really going to support the economy.”
As borrowing costs increase, Americans are facing lower mortgage rates, decreased credit card debt, and less expensive car loans, which is increasing household budgets. The rising household budgets may lead Americans to be more satisfied with the Biden-Harris administration, especially as Harris is a presidential election candidate.
The comments made by Donald Trump have raised concerns about the independence of the Fed. In an article published on September 18, 2024, in The New York Times, Jeanna Smialek mentioned, “but Mr. Trump’s comments have worried some economists, who are concerned that the Fed’s independence could come under assault if he is elected in November.”
Federal Reserve Chair Jerome Powell emphasized the importance of the independence of the Fed on on July 9, 2024. He stated that independence is a proven and politically popular means to achieve the best possible outcomes for the U.S. economy. A key aspect of independence is that it provides the Fed with the space to make difficult choices when it comes to managing inflation.
With less than two months to go until November’s presidential election, Trump’s latest intervention was not the first time he has been critical of Federal chair Jay Powell or accused the independent central bank of acting politically.
In an interview on June 25, 2024, Trump warned Powell not to cut interest rates before the election, but said that if he were elected to another four years in the White House, he would let Powell serve out the remainder of his term as chair if he was “doing the right thing” although Trump nominating Powell to serve as Fed chair in 2017.
Powell, who is generally respected on Wall Street for his leadership of the Fed, is a registered Republican who worked in the US Treasury under then- president George HW Bush before moving into investment banking and later working as a partner at the Carlyle Group.
