On Wednesday, Democratic California Representative Ro Khanna asked Federal Reserve Chair Jerome Powell to “lower interest rates immediately” or expose the country to the prospect of former President Trump’s reelection.
Among the most vocal lawmakers opposing the Federal Reserve’s attempts to combat inflation by raising interest rates, Khana has maintained that doing so would lead to a catastrophic economic downturn.
In next year’s likely rematch for the president between Biden and Trump, the health of the American economy might be a deciding factor.
Inflation has been out of control over the last two years; therefore, the Federal Reserve has hiked interest rates many times. Raising interest rates aims to bring inflation under control by reducing expenditure, thereby slowing down the economy in the United States.
Officials from the Federal Reserve said earlier this month that they expect further rate decreases next year after keeping rates constant for the previous three sessions. Most monetary policy decision-makers expect to decrease interest rates twice in 2024, except for three members.
With one crucial inflation index dropping below 3%, there has been a noticeable inflation improvement, leading to the anticipation of rate decreases. In November, the PCE price index was revised to an increase of 2.9 percent; in October, it dropped to 2.6 percent year-over-year.
Despite the Federal Reserve raising interest rates to a two-decade high, the jobless rate has remarkably stayed low, never surpassing 4%. The Labor Department reported that the unemployment rate in November was only 3.7% of the population.
Nevertheless, as we approach the prospect of interest rate decreases, Wall Street’s optimism in the US economy’s “soft landing” and avoidance of the recession that many predicted last year has been growing.
Amid Trump’s trade battle with China, the Federal Reserve raised interest rates in 2017 and refused to lower them to near-zero levels, prompting an unprecedented public pressure campaign against Powell. Throughout Trump’s administration, Powell maintained that he and the Federal Reserve would resist political pressure.
As inflation rose in November 2021, Biden ignored the demands of progressive politicians and activists for a more liberal chair, and Powell’s reappointment as head of the Federal Reserve was announced.