President Joe Biden is standing by his prediction that the Federal Reserve will enact an interest rate cut before the end of the year. The President doubled down on the rate cut prediction despite a Consumer Price Index (CPI) print released on Wednesday suggesting that inflation was reaccelerating.
“Well, I do stand by my prediction that, before the year is out, there’ll be a rate cut,” Biden said during a Wednesday press conference with Japanese Prime Minister Fumio Kishida. The President suggested that the hot CPI report would only delay a rate cut by a month or two.
Biden’s comments raised renewed concerns about the political independence of the U.S. central bank in an election year. Many Democrats believe a Federal Reserve interest rate cut could juice the economy and boost President Biden’s re-election efforts. In a speech last week, Federal Reserve Chairman Jerome Powell insisted the central bank does not allow partisan considerations to impact their monetary policy decision.
“Fed policymakers serve long terms that are not synchronized with election cycles,” Powell said, adding: “Our decisions are not subject to reversal by other parts of the government, other than through legislation.” The central bank chief continued: “This independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters.”
Wednesday’s CPI data cast further doubt on whether the Federal Reserve will move to reduce interest rates in the United States in the near term. The central bank has maintained that it believes interest rates must remain elevated until inflation hits 2 percent — the CPI print indicates inflation currently sits at 3.5 percent compared to last year.
"Before the year is out there’ll be a rate cut.”
US President Biden stands by his prediction that the Federal Reserve would cut interest rates by the end of the year, despite a new report showing stubbornly high inflation https://t.co/LoHoiS5oee pic.twitter.com/YvDQOfc3JZ
— Bloomberg Politics (@bpolitics) April 10, 2024