Hot inflation may put Fed rate cut in thick of election season
Fed won't make its move until after Americans go to the polls.
Rate futures markets now show investors see a first rate cut as most likely occurring at the Fed's Sept. 17-18 meeting after data showed inflation through the entire first quarter of 2024 was stiffer than expected and had demonstrably slowed progress on bringing it back to the Fed's 2% target.
A rate cut then — just seven weeks before Election Day — would shine a spotlight on the Fed, which goes to pains to keep itself out of the political tussle. Not cutting by then won't necessarily dim that light, though.
Fed officials are adamant their policy decisions are fully divorced from political concerns or influence — be it incumbent President's Joe Biden's hope for a soft landing of low inflation and low unemployment to carry into heart of the campaign season this autumn, or presumptive Republican nominee — and former president — Donald Trump's brewing argument that if the Fed cuts rates it will only be doing so to help his Democratic rival.
No Fed official has offered a potential start date, but policymakers' projections last month indicated on balance they still expected to deliver three, quarter-percentage-point rate cuts this year, an outlook first presented last December.
With that as a guide, investors for months had settled on June for a first cut, with the two other reductions staggered over the rest of the year. It was a timetable that had seemed well-phased around the hottest moments of the presidential campaign, but was thrown off this week
