Biden: "Rate Cut, Important Signal... Fed Independence Must Be Respected"

U.S. President Joe Biden defined the Federal Reserve's (Fed) initiation of interest rate cuts as an "important signal" and credited it as an achievement of his economic policies. He also targeted former President Donald Trump, the Republican presidential candidate, emphasizing the need to respect the Fed's independence.

[Image source=AFP Yonhap News]

In a speech at the Economic Club in Washington DC on the 19th (local time), President Biden said, "Unlike my predecessor, I respected the Fed's independence while pursuing inflation reduction goals, and that independence has been a great help to the country." He warned, "Since becoming president, I have never met with the Fed chair," adding, "If the Fed loses its independence, it will cause tremendous damage to our economy."

This was a pointed critique of former President Trump, who during his tenure repeatedly publicly criticized and interfered with the Fed's monetary policy decisions. Ahead of the November election, Trump has argued that the Fed should not cut interest rates before the election and that the president should have a say in the Fed's rate decisions.

However, foreign media including the Associated Press pointed out that Biden's claim of never having met Fed Chair Jerome Powell during his term was incorrect. Shortly after, Jared Bernstein, Chair of the White House Council of Economic Advisers, emphasized in a briefing that President Biden meant he had not discussed interest rates with Chair Powell.

Alongside this, President Biden stated, "The rate cut is good news for the overall economy," adding, "The rate cut is not a victory declaration. It is a declaration of progress signaling that we have entered a new phase of economic recovery." While highlighting his economic policy achievements such as easing inflation, he also stressed that there is still work to be done to lower costs for Americans, seemingly mindful of the felt inflation.

He said, "I believe it is important for the nation to recognize this progress," and argued, "Otherwise, the progress we have made will be trapped by the fear of negative mindsets that have dominated our economic outlook since the start of the pandemic." He further added that businesses should identify the "tremendous opportunities before us now" through investment and expansion.

Moreover, he raised his voice saying that former President Trump's economic policies had failed in the past and that if Trump were to enter a second term, he would "fail again."

The Fed, at the two-day September Federal Open Market Committee (FOMC) meeting held until the day before, cut the benchmark interest rate by 0.5 percentage points from the previous 5.25?5.5% to 4.75?5.0%. This marked the end of the monetary tightening policy that began with rate hikes in March 2022 to combat inflation. The Fed's rate cut is the first in about four and a half years since March 2020, when rates were urgently lowered in response to the pandemic.