Fed and politics: Central bank delivers jumbo rate cut ahead of presidential election

seekingalpha09-21

The Federal Reserve on Wednesday kicked off its first monetary policy easing cycle since the COVID-19 pandemic four years ago with a bumper 50 basis point rate cut, citing downside risks to the labor ...

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Wall Street (SP500) cheered the move, but not everyone is as pleased. The Fed's decision to cut the federal funds rate by such a large margin has pushed it into the political spotlight, especially in a presidential election year.  Former President Donald Trump continued his criticism of the Fed’s move this week less than two months ahead of the presidential election.  \"The country is doing badly, so you need the cut in one sense,” Trump told Newsmax in an interview. “In another sense, it really is a political move.”  \"Most people thought it was (going to) be half of that number, which probably would have been the right thing to do,\" Trump said. \"So it's a political move to try and keep somebody in office, but it's not gonna work, because the inflation has been so bad.” Fed Chair Jerome Powell, as he has done for years, on Wednesday pushed back against a question if the bank has been influenced by political concerns. Powell was appointed as chair by Trump. “Yeah, so this is my fourth presidential election at the Fed, and it’s always the same,” he told the press conference immediately after the rate cut was announced. “We're always going into this meeting in particular and asking what's the right thing to do for the people we serve? And we do that and we make a decision as a group, and then we announce it. And it's, that's always what it is, it's never about anything else.” Powell also faced public pressures from Democrats ahead of the rate decision. On Monday, three Democratic US senators in a letter to Powell urged the Fed to cut the federal funds rate by 75 basis points. “If the Fed is too cautious in cutting rates, it would needlessly risk our economy heading towards a recession,” Sens. Elizabeth Warren of Massachusetts, Sheldon Whitehouse of Rhode Island, and John Hickenlooper of Colorado said in the letter. “The Committee must consider implementing rate cuts more aggressively upfront to mitigate potential risks to the labor market.” A spokesman for the Fed on Monday was quoted as saying by Bloomberg that the central bank received the letter, and it intends to respond.  Vice President Kamala Harris, who is running against Trump for the White House, on Wednesday welcomed the rate cut. “While this announcement is welcome news for Americans who have borne the brunt of high prices, my focus is on the work ahead to keep bringing prices down,” she said in a statement.  When Trump was president, he had made public statements hinting that he may fire Powell. The remarks were met with criticism, calling them a threat to the independence of the Fed, in addition to not being legal. Powell never addressed the remarks directly.  However, amid the presidential campaign in recent weeks, Trump said a president should have a say in interest rates.  \"So countries that are, democracies around the world, countries that are sort of like the United States, all have what are called independent central banks,\" Powell said Wednesday. \"And the reason is that people have found over time that insulating the central bank from direct control by political authorities avoids making monetary policy in a way that favors maybe people who are in office as opposed to people who are not in office.\" Powell added that the central bank serves all Americans.  “We're not serving any politician, any political figure, any cause, any issue, nothing,” he said. “It's just maximum employment and price stability on behalf of all Americans. And that's how the other central banks are set up too. It's a good institutional arrangement, which has been good for the public and I hope, and I hope and strongly believe that it will continue.” Harris said last month that the Fed “is an independent entity and as president I would never interfere in the decisions the Fed makes.” For investors looking to track Wall Street's three major averages - the benchmark S&P 500 (SP500), the tech-heavy Nasdaq Composite (COMP:IND) and the blue-chip Dow (DJI) - here are some exchange-traded funds of interest: (VOO), (IVV), (RSP), (SSO), (UPRO), (SH), (SDS), (SPXU), (QQQ), (QLD), (TQQQ), (QID), (SQQQ), (DIA), (DDM), (UDOW), (DOG), (DXD), and (SDOW). For investors looking to track the elections through market instruments, here are some politically driven Republican and Democratic exchange-traded funds:  God Bless America ETF (YALL) American Conservative Values ETF (ACVF) Point Bridge America First ETF (MAGA) Democratic Large Cap Core ETF (DEMZ) Unusual Whales Subversive Democratic ETF (NANC) Unusual Whales Subversive Republican ETF (KRUZ)  Dear readers: We recognize that politics often intersects with the financial news of the day, so we invite you to click here to join the separate political discussion. More on the US elections and markets  How financial stocks may fare in a ‘game of regulatory seats’ under a Trump White House How four election outcomes could impact the markets, according to Société Générale Trump, Harris spar at second U.S. presidential debate Weekly Indicators: Fed Rate Cut Ignites Stocks And Bond Prices Don't Bet On A Soft-Landing, Sell The Rally","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"policyRegulatory","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2469333960"}