WASHINGTON - The U.S. Federal Reserve looks on track to cut interest rates as the presidential campaign season heats up, potentially delivering President Joe Biden a boost as polls show Americans dislike his handling of the economy.
Though the Fed only controls an overnight borrowing rate among banks, reductions to that benchmark - set at 5.25%-to-5.50% since last July - translate quickly to lower mortgage rates, cheaper car loans and easier financing terms for small businesses. The question is whether what is anticipated - roughly half a percentage point of reductions before voters go to the polls - will be sufficient to move the needle.
The developing dynamic between Biden, the economy and the Fed is in contrast to what former presidents Jimmy Carter and George H. W. Bush faced in the late 1970s and early 1990s, when inflation and Fed rate hikes arguably hurt their reelection chances. Both lost. The White House later clarified that Biden was offering his view of the economy, not making recommendations to the independent Fed, underscoring the political tightrope Biden and his campaign must walk when talking about the central bank.Republicans have used the Fed's rate hikes to bludgeon Biden, seeking to tether them to his mismanagement of the economy.
Source: Loan Digest (loandigest.net)
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