‘Playing politics’: Donald Trump, JD Vance react to Fed’s ‘big’ interest rate cut; Will this move impact US election?

This move is specifically intended to lower the cost of borrowing for consumers and businesses ahead of the November elections.

The Fed’s decision signals a departure from its previous high-interest rate strategy, which was intended to curb inflation, as price levels begin to decline towards the central bank’s long-term target of 2 per cent.

Here’s what Kamala Harris, Trump and Vance have to say

Following Powell’s announcement, Harris reaffirmed her commitment to tackling inflation. “While this announcement is welcome news for Americans who have borne the brunt of high prices, my focus is on the work ahead to keep bringing prices down,” she asserted in a press release. Meanwhile, President Joe Biden lauded the decision as an “important moment” in an X post.

Speaking to reporters during a visit to a bar in New York City, Trump stated that the rate cut “shows the economy is very bad, to cut [interest rates] by that much, assuming [the Fed] is not just playing politics.”

He termed the move to reduce rates by 50 basis points as “a big cut.”

On being asked about the rate drop during a rally in North Carolina, Vance asserted that a half-point cut is “nothing compared” to Americans have been facing for the last three years. His remarks sparked jeers from the audience.

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Will Fed rate cut’s move help Harris campaign to woo voters?

In a press conference on Wednesday, Powell stated that the economy “is growing at a solid pace” and that the rate drop was implemented to maintain the economy in “good shape.”

The Fed chairman also touched on the subject of inflation, stating that it “is coming down.”

He further addressed the worries about the impact of politics over rate decisions. Reiterating the central bank’s independence, he said: “We’re not serving any politician, any political figure, any cause, any issue, nothing.”

Senior scholar at Brookings David Wessel underlined the significance of borrowing costs, stating that the cost of borrowing to obtain a mortgage or buy a car is a major concern in the US, implying that Harris’ campaign may profit from this rate reduction.

Interest rates have the potential to become a contentious topic during elections because lower rates are often more popular policy since they improve personal finances by lowering the cost of mortgages and the interest paid on student and small business loans.

Trump claimed this summer that the Fed could take a politically motivated decision if it decides to cut rates before November’s election. He told Bloomberg that the Fed should not be acting in this way, even though the data indicated that a cut was necessary given the slowing inflation and rising unemployment.

He pledged the Fed will “do a lot of cutting,” if he gets elected.