President Joe Biden has doubled down on his prediction that the Federal Reserve will cut interest rates by the end of the year, despite data showing inflation is again on the rise. Speaking during a press conference Wednesday alongside Japanese Prime Minister Fumio Kishida, Biden spoke of his hopes that rates would be cut, stating, “Well, I do stand by my prediction that, before the year is out, there’ll be a rate cut.” Biden conceded the potential for a postponement in cuts following the release of the latest Consumer Price Index (CPI) report during the conference, stating, “This may delay it a month or so, I’m not sure of that. We don’t know what the Fed is going to do for certain.”
Wednesday’s CPI data – which showed consumer prices rising 0.4% last month and by 3.5% compared with a year earlier – has cast doubts on the likelihood of a near-term cut in interest rates by the Federal Reserve. The outsized jump in inflation – in line with economists’ forecasts – comes after consecutive months of higher-than-expected inflation rates. The central bank has signaled its intention to keep interest rates at elevated levels until inflation reaches 2%.
The President’s comments have revived concerns about the Fed’s independence in an election year, as many Democrats believe that a rate cut could jump-start growth and perhaps give Biden’s re-election campaign a boost if the White House were to press on the central bank’s decision making. But the Fed’s chairman, Jerome Powell, pledged a commitment to nonpartisanship, insisting that political considerations do not play a role in the Fed’s monetary policy decisions.
“Fed policymakers serve long terms that are not synchronized with election cycles…Our decisions are not subject to reversal by other parts of the government, other than through legislation,” Powell said. “This independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters.”
Biden’s prediction of a rate cut aligns with a broader posture that he and his allies have been taking on the economy, accusing Republicans of offering policies that will only cut taxes for the wealthy while raising them for other Americans, and defending his administration’s strategy that he says has already produced results in reining in the inflation rate. “Our plan is one I think is still sustainable,” the president insisted.
Despite mounting calls for rate cuts, at its latest meeting the Federal Reserve kept interest rates where they were and, shortly after, chair Jerome Powell remarked that a slight but transient uptick in inflation had not fundamentally altered the economic picture.
Biden initially suggested in March at a campaign rally in Philadelphia that more cuts were coming soon. “I can’t guarantee it, but I’ll bet you, because I bet you that that little outfit that sets interest rates is going to come down.”
Inflation has not fallen in a single month since Biden's term began (the closest was July 2022 when it was unchanged), which leaves overall prices up over 19% since Bodenomics was unleashed. And prices have never been higher. pic.twitter.com/Wt0zaCpTvN
— zerohedge (@zerohedge) April 10, 2024
