No one knows how Tuesday’s presidential election will turn out, but the Federal Reserve’s move two days later is much easier to predict: With inflation continuing to cool, the Fed is set to cut interest rates for a second time this year.
FILE - Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, on Sept. 18, 2024.
“The restriction was in place because inflation was elevated,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “Inflation is no longer elevated. The reason for the restriction is gone.” Jonathan Pingle, an economist at Swiss bank UBS, said that Waller’s phrasing reflected “unusual confidence and conviction that rates were headed lower.”
The Fed chair said the officials have to assess where neutral is by how the economy responds to rate cuts. For now, most officials are confident that at 4.9%, the Fed’s current rate is far above neutral. With the Fed’s latest meeting coming right after Election Day, Powell will likely field questions at his news conference Thursday about the outcome of the presidential race and how it might affect the economy and inflation. He can be expected to reiterate that the Fed’s decisions aren’t affected by politics at all.
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