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Interest Rate Cuts Could Be a Boon to Biden

Federal Reserve officials do not set interest rates with presidential elections in mind. In fact, the central bank is independent of the White House and, as the Fed chair, Jerome H. Powell, has said repeatedly, the institution takes that independence seriously.

But the growing likelihood that the Fed might begin to cut rates this year could provide an election-year assist to President Biden. Investors do not widely expect rate cuts to be announced when Fed officials conclude a two-day meeting on Wednesday. But they anticipate a rate cut in the near future, with possibly more to come before November.

Interest rate cuts could also help to improve housing affordability, an issue for young voters that has bedeviled the president. Falling interest rates could drive down mortgage rates. That might entice home buyers, but it could also spur more homeowners to put their houses on the market after years of clinging to mortgages they took out when rates were much lower. An improving supply of available homes could help to keep a lid on prices, some economists hope.

White House officials are careful not to comment on Fed rate decisions; Lael Brainard, a former Fed governor who heads Mr. Biden’s National Economic Council, laughed off a reporter’s question on the topic last week. But privately, some administration economists are watching the Fed’s moves for any sign of additional mortgage-rate relief.

The Fed may have already, and unintentionally, helped Mr. Biden’s re-election prospects by holding rates steady for the back half of 2023 as inflation cooled. Continued rate increases could have slammed the breaks on economic activity and increased the chances that the economy slipped into recession — which is one reason progressive groups, and some Democratic senators, urged Fed officials to pause rate increases last year.

Sumber: www.nytimes.com