U.S. President Joe Biden said he was sticking with his forecast that the Federal Reserve would cut interest rates by the end of the year, even though the March CPI report showed stubbornly high inflation.
"I do stick with my forecast that before the end of the year, the Federal Reserve will be cutting interest rates," Biden said at a White House news conference on Wednesday with Japanese Prime Minister Fumio Kishida. Biden said Wednesday's CPI report could delay a rate cut by at least a month, but he was ultimately unsure how the Fed would act.
A third straight month of higher-than-expected inflation data dealt a fresh blow to Biden's re-election prospects ahead of the November election, fueling concerns that voters could punish him for high prices and delaying hopes of a rate cut by the Federal Reserve.
But Biden defended his economic record while acknowledging persistent inflation problems. "We've brought inflation down significantly from 9% to closer to 3%. We're in a better position than when we took office," he said.
The White House traditionally does not comment on Fed decisions, and Biden has previously pledged to respect the Fed's independence. But last month, he said he expected the Fed to ease interest rates. However, Wednesday's CPI data made it harder to imagine the Fed cutting rates before the election, which is seen as a way to inject more momentum into the stock market and make it easier for Americans to buy homes and cars and pay down debt.
On Wednesday, two-year Treasury yields surged while major S&P 500 components retreated, suggesting investors are skeptical the Fed will act in June. But if the Fed fails to cut rates in July, its next meeting won't be until September. By then, some economists believe the Fed's Federal Open Market Committee will wait until after the election to cut rates to avoid the appearance of trying to influence the outcome.
“One of Powell’s responsibilities is to protect the Fed’s public reputation,” said Vincent Reinhart, chief economist at Dreyfus and Mellon. “The closer the FOMC’s actions get to the election, the more likely the public will question the Fed’s intentions.”
That’s bad news for Biden, whose reelection depends on suburban swing voters who have seen mortgage rates surge during his tenure. In recent weeks, Biden has repeatedly offered hopeful predictions that the Federal Reserve will cut interest rates while holding events aimed at highlighting his administration’s focus on addressing rising housing costs.
Biden cannot afford any further deterioration in Americans’ views of the economic outlook as he continues to trail former President Donald Trump in reelection polls. Despite strong employment during Biden’s term — including the addition of more than 300,000 new jobs in March — the corresponding inflation has stoked voter anxiety.
Voters said their personal finances were better off under Trump by 16 percentage points in a Bloomberg News/Morning Consult poll of swing states last month. More than a third said the economy was their single most important issue, while less than a third said it was on the right track.
Trump attempted to push that advantage in a post on his Truth Social platform Wednesday morning, saying: "Inflation is back and getting worse! The Fed will never be able to reliably lower interest rates because they want to protect the Worst President in American History!"
Biden acknowledged in a statement earlier Wednesday that the administration still has more work to do to lower gas prices. “Housing and grocery prices remain too high, although staple household items like milk and eggs are less expensive than they were a year ago,” he said.
The article is forwarded from: Jinshi Data
