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POLITICIZED FED: It was inevitable that the Federal Reserve Board would become a political football as interest rate cuts emerge as a key part of the economic narrative this fall.
AND IT WAS INEVITABLE that infighting would erupt ahead of an extension of the budget, which has an Oct. 1 deadline.
THE BICKEERING ON CAPITOL HILL over these two issues is largely confined to Republicans, who are reeling over polls showing that voters clearly think Donald Trump was the loser in Tuesday night’s debate.
SO THE REPUBLICANS NEED SOME ISSUES, FAST: Led by Trump, they are warning the Fed to avoid an interest rate reduction next week. “They know they shouldn’t be doing that,” Trump declared recently, and many Republicans think the Fed is attempting to influence the election.
TRUMP WAS A PROPONENT of easy money in his first term as president, when he berated Fed Chairman Jerome Powell for being overly restrictive on monetary policy. Now Trump thinks the central bankers should reject a market-friendly rate cut.
TRUMP’S ANTIPATHY TOWARD THE FED has prompted him to proclaim that the president should have a permanent seat — and a permanent vote on interest rates — on the Federal Open Market Committee. This has generated enormous opposition within the Fed and in the markets.
LOOK FOR TRUMP TO BLAST THE FED when the funds rate is cut next week, and when it likely moves again, a day after the election. Several other rate reductions are likely in the winter and spring, with Trump having no impact on monetary policy.
TRUMP MAY HAVE A GREATER INFLUENCE over fiscal policy, as House Republicans bicker over the Oct, 1 budget deadline. Speaker Mike Johnson can’t get fellow Republicans to agree on how long an extension should last and whether there should be amendments.
RESOLUTION OF THIS BUDGET IMPASSE could take a week or two to iron out, which could generate headlines about more spending and a government shutdown. Democrats are happy to see Republicans in disarray over this issue, which could hurt the GOP’s election prospects.
BUT EVENTUALLY THERE WILL BE A BUDGET DEAL which should last into the winter. There won’t be a shutdown but budget experts already are bracing for still another debt ceiling brawl starting in the spring.
REPUBLICANS HAVE ENOUGH TO WORRY ABOUT after the high ratings from Tuesday’s debate, which voters overwhelmingly thought the Democrats won. Kamala Harris has moved into a clear lead in the Las Vegas betting parlors, even though her margin in key states like Pennsylvania is razor-thin.
TRUMP STILL HAS A PATH to 270 electoral votes, which is all that matters. He still has a chance, but Republicans cannot afford to send a confusing message on monetary and fiscal policy.
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