FOR IMMEDIATE RELEASE
Contact: Kenny Stancil, [email protected]
Federal Reserve Chair Jerome Powell announced today (7/31/24) that the Federal Open Market Committee (FOMC) is keeping the federal funds rate at 5.33% for the 12th consecutive month. The Fed’s refusal to provide interest rate relief at this juncture defies economic reason. It makes no sense to postpone cuts. A cut is warranted right now. Inflation has fallen to 2.5%. If you exclude food, energy, and housing, inflation is at the Fed’s target of 2%. Notably, high interest rates can’t do anything to combat the price-gouging occurring in those heavily concentrated sectors; in fact, the Fed has actually been exacerbating the problem, because high rates are impeding housing construction and green energy investment, thus making shelter and power more expensive. Meanwhile, the unemployment rate has creeped up to 4.1%, an increase of 0.5% over the past year, with job creation and nominal wage growth both continuing to slow down. Because increases in unemployment tend to snowball, it’s essential to lower interest rates before a recession begins.
Powell himself admitted during his semiannual testimony before Congress on July 9 that “this is no longer an overheated economy” and that “the labor market appears to be fully back in balance.” Every economic indicator is pointing to the need for an immediate interest rate cut. The Fed is supposed to act in accordance with available data irrespective of potential political impacts. So why isn’t it? In June, former President Donald Trump, the Republican nominee who is desperate to stay out of prison, urged the Fed not to cut rates before the November election, arguing that doing so would help Democrats. We can only speculate, but it looks as if Powell, either out of fear of appearing political or out of a genuine preference for GOP policies, is listening to Trump.
In response to the FOMC’s decision, Revolving Door Project Executive Director Jeff Hauser released the following statement: “That Powell’s Fed still refuses to lower interest rates—after Trump said that rates shouldn’t be lowered before the election—raises questions about the central bank’s independence. Whether the Fed keeps rates high or brings them down, one of two presidential candidates will benefit. While lower rates would provide much-needed economic relief to the American people, Powell has instead chosen to stick it to the people and give an electoral boost to Trump.”
Revolving Door Project Senior Researcher Kenny Stancil added: “The FOMC’s decision to maintain high interest rates despite all evidence showing the need for an immediate cut doesn’t preserve the Fed’s independence or make Powell apolitical; it makes him a shill for the Republican Party’s anti-worker, pro-Wall Street priorities.”
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