If Interest Rates Fall, Mortgages Will Drop... Worst Inflation Is Over
Trump: "Fed Helps Democrats by Lowering Rates"
With the U.S. presidential election approaching this November, there is an analysis that if the Federal Reserve (Fed) lowers interest rates, it could bolster President Joe Biden's reelection bid.
On the 25th, major foreign media reported that if the Fed lowers interest rates, it could play a significant role during the election period by creating a positive attitude toward high inflation and soaring housing costs, which are considered obstacles to President Biden's reelection. At the same time, it was analyzed that former President Donald Trump's side could criticize the Fed, which should be independent, for siding with President Biden.
Foreign media analyzed that the recent Federal Open Market Committee (FOMC) regular meeting results present a positive outlook for President Biden, including economic growth, low unemployment, and easing inflation. The market expects two interest rate cuts before this year's election. This can be interpreted as meaning the worst inflation has passed. If the benchmark interest rate goes down, mortgage rates and auto loan rates decrease, and corporate financing becomes easier.
Celinda Lake, a Democratic pollster who worked on Biden's 2020 campaign, said, "Lowering interest rates will greatly help build confidence in the economy at a time when people are focused on the election," adding, "People feel like they are being squeezed for money every time."
However, there is also an opinion that a 0.5 percentage point cut in the benchmark interest rate before the election will not significantly affect the election. Lindsey Owens of the progressive policy group Groundwork Collaborative said, "We are in the highest interest rate environment in 23 years, and even if additional rate cuts are made before November, the fact that mortgage rates remain high does not change."
According to polls, Americans have given negative evaluations of President Biden's economic policies due to rising prices of groceries, energy, and other essentials. As inflation soared to 9.1%, the University of Michigan Consumer Sentiment Index recorded an all-time low in June 2022.
The Republican Party is attacking President Biden's economic policies due to the Fed's interest rate hikes. Anna Kelly, spokesperson for the Republican National Committee, pointed out, "Under President Biden, the Fed raised interest rates to the highest level in 23 years, making it even harder for households struggling with 'Bidenflation' (Biden + inflation)."
Former President Trump is also focusing on interest rates. In an interview with Fox Business last month, he criticized Fed Chair Jerome Powell as "political" and claimed that Powell is trying to lower interest rates to help the Democrats in the election.
Experts emphasized the Fed's independent judgment even during the election season. Michael Walden, a professor of economics at North Carolina State University, said, "Whatever the basis of the criticism, Chair Powell should be prepared to plug his ears for the next few months."
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