Fed rate-cut pivot carries pitfalls for chief Powell

BLOOMBERG

Federal Reserve Chair Jerome Powell’s pivot towards interest-rate cuts is spreading holiday cheer in the White House, where the improved prospects for an economic soft landing are a boon for President Joe Biden’s bid for another term.
Biden has seen his poll numbers sag amid voter anxiety over a surge in the cost of living, and he would face a bigger headwind to winning another term in November if the US tumbled into a recession.
As top aides continue to tout the strength of the economy — including low unemployment, easing price pressures and sturdy growth — falling rates would bolster his case to voters.
But there are pitfalls for the US central bank. Powell’s surprising pivot risks fanning suspicions that he’s deliberately trying to give Biden a boost in his expected re-match with Donald Trump. The Fed chief said that the Fed doesn’t take politics into account in making policy.
The upcoming election “exposes them to heightened criticism,” said Brookings Institution senior fellow Sarah Binder.
While the job market has remained strong and the underlying economy resilient, a dramatic run-up in prices since Biden took office has soured voters on his handling of the economy.
After the Fed held rates steady for the third straight meeting, Powell told reporters that policymakers were probably done hiking and had begun discussing when to cut rates.