Donald Trump warned the Federal Reserve to hold interest rates until the election, something that would boost the economy but help the Democratic Party.
Republican candidate Donald Trump openly admitted in an interview with Bloomberg he warned Federal Reserve Chairman Jerome Powell to hold interest rates until the election. Slashing interest rates would result in a strong economic stimulus, something US citizens have been waiting for after years of inflation.
The Federal Reserve is the economic body in charge of the US monetary policy. Among other things, it rules on the US dollar interest rate to stimulate or depress the economy.
After the COVID-19 pandemic and the Russian invasion of Ukraine, US inflation jumped to a 40-year high of 9.2%. This forced the Federal Reserve to increase interest rates to a 23-year record of 5.25%.
Such high interest rates put a heavy toll on the American consumer and are causing slower economic growth. On the other hand, they are slowly taming down inflation, which finally decreased below 3% in June. The Fed’s inflation target is 2%.
As inflation is finally slowing down and the economy shows signs of malaise, markets believe with absolute certainty the Fed will cut rates by September, two months before the election. Cutting interest rates would mark a definitive victory against inflation and would raise the Democratic candidate’s chances of winning the presidency.
leggi anche
The fate of dollar rests on the US election
Republican sabotage
The Federal Reserve is historically an apolitical body whose only interest is enhancing the US economy. The current chairman, appointed by Donald Trump in 2017, will serve until 2026.
Cutting interest rates in September is the objectively best thing for the US economy. Warning the Federal Reserve to hold off until the elections means putting political interest before the economy.
If Donald Trump becomes President again, he theoretically will have the power to remove Jerome Powell ahead of the natural end of his term. Doing so would cause immense chaos and likely cause a Wall Street crash.
“I would let him serve it out,” Trump said during the interview, “especially if I thought he was doing the right thing.” Trump did not specify what he considered to be the right thing.
Cutting interest rates before the November election is “something that they know they shouldn’t be doing,” Trump added. He also said that, if elected president, he would make sure the Federal Reserve becomes a wholly political body.
Donald Trump is currently ahead in election polls. An Ipsos poll on July 16th puts Trump at 43% compared to Biden’s 41%. The Republican candidate is also ahead in every swing state by at least one percentage point.
President Joe Biden’s approval suffered a heavy hit after his disastrous performance during the June 27 debate. He appeared incapable of creating meaningful sentences or finishing a train of thought. The Democratic party is currently debating whether to replace Biden as presidential candidate, but it would be virtually impossible without his explicit consent.
