Chicago — Judging from yesterday’s surge on Wall Street, Jerome Powell’s proposed rate cut should help Kamala Harris runs for president.
unless Fed Not making the second huge mistake of the past two years, intervening late again to avoid a recession, which could start to show up through some negative data before the November 5 vote.
This logic is very convincing. Reduce costs An increase in money usually helps growth and employment, which then stimulates markets. Trump soon announced the start of the “Kamala Air Crash”The slowdown in employment had worried Wall Street some time ago.
Likewise Harris will be able to celebrate and set new stock market recordsif yesterday’s trend is confirmed in the coming days. However, with mortgage rates falling in a few months, the impact of the rate cut on economic growth, employment or even the housing market is unlikely to be noticeable.
Kamala Harris, enthusiastic return: The most important thing now is not to make mistakes
However, if they begin to slow the job market slump seen in July, that would be enough. The Fed is late again and take immediate action to avoid a recession that actually begins.
The central bank made a huge mistake in the summer of 2022 when it let inflation rise to 9.1%. Perhaps this mistake, added to Government subsidies too generous after the coronavirus crisiscausing President Biden’s approval rating to fall uncontrollably, becoming a key factor in his withdrawal from the election. The danger now is that the Fed will do it again, perhaps precisely to avoid giving the impression that it is lowering the cost of money and providing political help to the head of the White House.
II Consumer Price Index, That is, the official inflation data fell to 2.9%, and the inflation index also fell to 2.9%. Personal consumption expenditureThe Fed’s preferred goal is to keep price increases around 2%.
However, at the same time, Employment starts to slow, up 4.3% People who were not working registered in July.Thus, Powell put together the first positive data and the second worrying data and announced that it was time to act on interest rates.
An important new factor will come on September 6, when the August employment data is released. By then, the central bank will have all the elements it needs to make a decision on the cost of money at its meeting scheduled for September 17-18, especially if they are worried.
Judging from Powell’s comments at Jackson Hole, one might have expected a cut. What is unknown is how much. If it is the usual 0.25%, it would confirm the approach of gradual action and would not produce a disruptive reaction. However, if the Fed decides to intervene more drastically, at 0.50% or even higher, it would indicate that the situation is worse than expected.
That would likely spark a panic, or at least a more frantic reaction, which wouldn’t benefit Wall Street and certainly wouldn’t help the presidential campaign.
Harris’s profile.
Therefore, we hope that the central bank will act in a responsible and professional manner, based on the technical foundation of data. Not affected by Trump’s recent attacks accusing her of preparing to cut interest rates to help Biden, and now blaming Harris.
Because otherwise he would have made his second huge mistake in a few years because he was unable to maintain his independence and resist political pressure.