Federal Reserve slashing rates ahead of Election Day would likely just superficially boost US wallets: experts

The Federal Reserve is anticipated to slash interest rates this year ahead of Election Day, which will likely lead to a superficial boost to Americans feeling wealthier ahead of casting their votes, though the cuts would have detrimental effects in the long run, experts say. 

“I think superficial is exactly the key because one of the things that happens when you cut interest rates is that you do get a temporary boost to the economy driven by an ease of access in terms of debt. So a lot of Americans right now, they can’t afford today’s punishingly high home prices, with today’s punishingly high interest rates,” EJ Antoni, research fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told Fox News Digital in a phone interview. 

“But if you allow interest rates to drop very quickly, then it’s going to take time for home prices to ramp up to counteract, essentially, that interest rate hike. So you get this temporary effect where Americans will feel wealthier because they’re able to spend more. Now, they’re spending outside of their means and the long-run effects of that are going to be very detrimental, but in the short run it feels great,” he continued. 

The Federal Reserve is widely anticipated to cut rates this year during two of its four meetings, which President Biden’s campaign could point to as evidence inflation is slowing and boost confidence among voters in the economy. 


biden making campaign speech

President Biden speaks at the Pieper-Hillside Boys & Girls Club in Milwaukee, Wisconsin, on March 13, 2024. (Alex Wroblewski for The Washington Post via Getty Images) / Getty Images)

​​”Rate cuts are massively popular with people. It will really help build confidence in the economy just as people are paying closer attention to the election,” Celinda Lake, a Biden pollster in his 2020 campaign, told Reuters last month. “People are really feeling like they are being gouged every way to Sunday.”

The Federal Reserve left interest rates unchanged at its March meeting for the fifth straight time, and kept the federal funds rate between a range of 5.25% to 5.5%, which is a 22-year-high. The decision last month also kept rates for mortgages, loans and credit cards at elevated levels. 

Earlier this year, consumer prices on an annual basis rose 3.2%, while producer prices rose 1.6% last month on an annual basis, which were both higher than economists anticipated. 


The central bank expects to cut interest rates three times in 2024, with Antoni citing famed economist Milton Friedman’s comparison of inflation to alcoholism, where slashed rates will give consumers a quick buzz, with “disastrous” consequences. 

“Milton Friedman… used to compare it, this whole phenomenon, to alcoholism where, you know, the detox process is very painful, but in the long run it leads to health. But if you allow somebody to go back to the bottle, then they get a temporary buzz from indulging in alcohol again and the long-run effect is again going to be very disastrous,” he said. 

Antoni said “politicians have been incentivized to put lipstick on the pig,” regarding the economy, until after Election Day. 

The Federal Reserve building in Washington

A pedestrian passes the Federal Reserve building in Washington, D.C., on June 3, 2023. (Nathan Howard/Bloomberg / Getty Images)

“Essentially, this is all about getting past Election Day. After that, it doesn’t matter, because the voters will have voted and, and so you’re unfortunately looking at a situation where the politicians have been incentivized to put lipstick on the pig until that first Tuesday in November. And then, after that, the reality can settle in and it won’t matter,” he said. 

Biden in recent months has said he anticipates the Fed will slash interest rates, including last month. 


“I can’t guarantee it, but I’ll bet you – I’ll bet you those rates come down more because I bet you that little outfit that sets interest rates is going to come down,” Biden said in Philadelphia. 

The Federal Reserve is an independent body that autonomously makes decisions, largely in part to keep the central bank immune from any political pressures. The White House has traditionally avoided speaking on the Federal Reserve, though the White House clarified after Biden’s comments that the president was simply outlining his view of the economy, not trying to influence the Fed. 

Antoni said Biden is not the first president to weigh in on the Federal Reserve, while arguing his remarks reflect that the “Fed is no longer a politically independent institution.”

“I will say in all fairness to President Biden, he’s not the first person to do that. There have been other presidents who have done that before, but nevertheless, it is still at least a breach of decorum if nothing else. Unfortunately, though, I think it reflects the reality that we live in today: That the Fed is no longer a politically independent institution,” Antoni said. 


“It is a far cry from what the old school bankers like JP Morgan originally envisioned, where it would simply be the bankers’ bank, not a government entity. And sadly, today, it very much is a government entity. It essentially has been captured by the Treasury,” he continued.

The Trump campaign’s spokeswoman, Karoline Leavitt, said the Fed lowering rates “will not make up for the damage that Biden’s terrible economic policies have done.” 

“In an attempt to corral Joe Biden’s record high inflation, the Fed hiked interest rates to the highest level in 23 years, further hurting hardworking families who are struggling to afford the increased costs of groceries, gas, and rent. Slight cuts by the Fed now will not make up for the damage that Biden’s terrible economic policies have done over the past four years. Americans trust President Trump to fix our economy and put more money back in their pockets, as he did in his first term,” Leavitt told Fox News Digital. 

Larry Kudlow, the former director of the National Economic Council under the Trump administration and a FOX Business host, argued last month that “Joe Biden needs a lot more than a couple of interest rate cuts to bail out his re-election, and you can take that to the bank.”

“The year-on-year inflation has declined from 9% to somewhere between 3 and 4%, but, even so, the actual level of consumer prices is up over 18% during Biden’s tenure and that’s driving typical families crazy. Measured from February 2021, groceries are up 21%, gasoline up 30%, cars up 20%, airline fares and transportation services up 34% and those are just a few categories,” he said on his show last month. 

“The lagging impact of that 9% CPI is going to haunt working folks for years to come. That’s Joe Biden’s problem. That’s the Achilles heel of ‘Bidenomics,’ ‘Bidenflation’ and Biden’s re-election. A couple of rate cuts by the Fed will not bail Biden out and indeed could make things worse.”

Fed Chairman Jerome Powell speaks during a press conference

Federal Reserve Chairman Jerome Powell speaks during a news conference on Sept. 20, 2023, in Washington, D.C. (Chip Somodevilla / Getty Images)

Antoni said the Fed slashes interest rates when it has confidence in the robustness of the economy, not when experts are concerned about the state of the economy. He said, “Nothing coming out of the Fed, frankly, makes much sense.” 

“If you go back to 2019, for example, what was the Fed doing? I mean for the entire first three years of the Trump presidency, they were tightening monetary policy. They were reducing the balance sheet, the assets that the Fed has, they were also increasing interest rates. A lot of people forget that the Fed tightened so much, that by September of 2019, they actually temporarily lost control of interest rates,” he said. 

“What happened back then was economic growth was slower than it is today. Job growth was slower than it is today. Inflation was slower than it is today. In other words, all of the major metrics that the Fed keeps talking about as their reasoning for cutting or increasing interest rates, all of them are worse today than they were back then.”

The Fed, however, is now talking about interest rate cuts instead of rate hikes, as they did under Trump. Antoni said politics is largely behind the decisions, pointing to Federal Reserve Chairman Jerome Powell as acting out of political pressures.


“When Powell was up for renomination, he kept rates below 1%, despite the fact that inflation was running up to a 40-year high. And actually, right before his confirmation, he was even asked about this whole idea of a 75-basis point hike. In other words, hiking not by a quarter percent, or half a percent, but three quarters of a percent – something that hadn’t been done in decades. And he took that off the table,” Antoni said. 

“He delivered four of those jumbo size rate hikes right after his confirmation,” Antoni said.

Powell was nominated to the Fed’s Board of Governors in 2012, before he was nominated to chair by then-President Trump in 2017 and renominated to the position by Biden.

Powell said Wednesday during a speech at Stanford that the Fed’s decisions are made without “political bias,” a sentiment he has previously repeated, including in February when he said on “60 Minutes” that “we do not consider politics in our decisions.” 

“And by objective, I mean that our analysis is free from any personal or political bias, in service to the public. We will not always get it right – no one does. But our decisions will always reflect our painstaking assessment of what is best for our economy in the medium and longer term – and nothing else,” he said Wednesday. 

US midterm elections

A sign denotes a polling location on Election Day on Nov. 8, 2022, in Grand Rapids, Michigan. (Bill Pugliano / Getty Images)

Trump weighed in earlier this year, saying that if he’s re-elected to the White House, he would not reappoint Powell, citing he’s “political.” 

“I think he’s political,” Trump said on FOX Business in February. “I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”

The economy is a top issue for voters, often ranked alongside concern over the immigration crisis, with a Fox News poll this month finding 61% of voters believe Biden has failed at handling the economy. 

Antoni said polls reflect the reality of how Americans feel about the economy, but are “mismatched” when compared to data being promoted by the Biden administration, which published “overwhelmingly positive and strong” numbers on the economy. 


“​​If we look at the inflation data, for example… According to the Bureau of Labor Statistics, the component that they use within the consumer price index to try to account for the cost of homeownership, that metric has increased 20% over the last three years, since Biden’s been in office, which is bad,” he said. 

For sale sign at home

A “For Sale” sign outside a home in Atlanta on Feb. 17, 2023. (Dustin Chambers/Bloomberg via / Getty Images)

The data, however, used numbers reflecting rental prices, not prices to purchase a home or interest rates, he said. 

“They don’t look at things like property taxes, home insurance, all of the things that go into the actual cost of owning a home. So if you use real world data, and you recalculate that, it’s not 20%, it’s 80%,” he said. 


The cost for homes has spiraled into trends of “doom spending,” where younger generations feel there’s no point in saving for retirement or a home because costs are so high, so they spend their incomes on immediate purchases. 

“What that has done is it’s caused the consumer spending numbers to look great, but it’s also caused the savings rate to tank today. The savings rate is actually less than half of what it was before the pandemic. And it’s way below what it was when Biden took office.”

“That’s really bad in the long run because savings are where you get investment. That’s where you get capital. That’s where you get improvements in technology, whether it’s AI or tools that a machinist is going to use in a factory. And that’s where you get increases in productivity. That’s where you get increases in real wages and living standards etc.,” he said. 


“So if you want to kill a country in terms of its long-run economic growth, you lower its investment. And sadly, that’s what we’re doing,” Antoni said. 

Fox Business’ Suzanne O’Halloran contributed to this report. 

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