\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/08\/GettyImages-1158904990-e1722544634502.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
Federal Reserve chair Jerome Powell is navigating a minefield of political pressure<\/a> from both<\/a> Democrats and Republicans.\u00a0<\/p>\n Democrats are pressuring Powell to cut interest rates<\/a>, which he didn\u2019t do at Wednesday\u2019s Fed meeting. Meanwhile, Republicans don\u2019t want Powell to do anything before the election. Yet, the central bank is expected to remain rigorously independent<\/a> to ensure its decisions are made solely based on economic data and market conditions and not influenced<\/a> by any political considerations.\u00a0<\/p>\n At Wednesday\u2019s meeting Powell said he was \u201cabsolutely\u201d convinced that even the widely expected<\/a> September rate cut could be apolitical. \u201cWe don\u2019t change anything in our approach to address other factors, like the political calendar,\u201d he told reporters.\u00a0\u00a0<\/p>\n However, the Fed must contend with the politics of an election year, even as it attempts to sustain its crucial arms-length distance, according to Columbia Business School economics professor Brett House. \u201cWhile the Fed isn\u2019t immune to politics, it\u2019s not subject to them either,\u201d he told Fortune<\/em>.\u00a0<\/p>\n The pitch of political voices ratcheted up in the days before and after Wednesday\u2019s meeting.\u00a0<\/p>\n A group of progressive Democratic senators including Elizabeth Warren (D-Mass.), John Hickenlooper (D-Colo.), and Sheldon Whitehouse (D-R.I.) wrote Powell a letter<\/a> accusing him of delaying rate cuts due to political pressure from Republicans. \u201cThe data appears to clearly justify cutting rates, the failure to do so would indicate that the Fed is giving in to bullying,\u201d the senators wrote.\u00a0<\/p>\n Warren, Hickenlooper, and Whitehouse did not respond to a request for comment.\u00a0<\/p>\n Inflation data has been coming down gradually<\/a> in recent months. The Fed\u2019s preferred inflation metric, the personal consumption expenditure index, fell for the past three months<\/a>. In remarks after Wednesday\u2019s meeting Powell seemed pleased with the state<\/a> of the labor market<\/a> which he said was finally returning to an appropriate balance<\/a> after being \u201coverheated\u201d in the post-pandemic recovery. However despite these promising trajectories, the Fed chair continued his mantra of wanting to see \u201cmore good data<\/a>\u201d that indicated these trends weren\u2019t temporary in order to make his final decision.\u00a0<\/p>\n The Democrats felt Powell was waiting unnecessarily and for the wrong reasons. \u201cRefusing to follow the economic data and succumbing to political threats would be a subversion of your mandate,\u201d the three Democratic senators told Powell. \u201cWe urge you to make monetary policy in the interests of the American public, not a particular political party.\u201d<\/p>\n Republicans on the other hand didn\u2019t want any rate cuts prior to the election. \u201cI personally don\u2019t think they should [cut rates] Sen. Kevin Cramer (R-N.D.) told<\/a> Politico earlier this month. \u201cAt this point, anything they do before November would be rightfully\u2014would raise the question of their own independence.\u201d<\/p>\n GOP members view a boost to the economy as a blow to their campaign message that the economy is faltering. Former President Donald Trump, the current Republican nominee, has been among the most vocal in pushing the Fed to hold steady. In a February interview, Trump accused Powell of looking to cut rates before the election \u201cfor the sake of maybe getting people elected<\/a>,\u201d he told<\/a> Fox<\/a> Business.\u00a0\u00a0<\/p>\n Still other Republican politicians left the door open for rate cuts, but only if they deemed them appropriate. \u201cIt\u2019s justified if it\u2019s justified,\u201d Rep. Andy Barr (R-Ky.) told<\/a> Politico Wednesday. \u201cBut the fact is, they\u2019re not there yet. They haven\u2019t achieved price stability yet.\u201d<\/p>\n There is no evidence the Fed would cut rates if the macroeconomic picture did not warrant doing so. Powell said the Fed would only look at the data when making its considerations. \u201cThis is my fourth presidential election at the Fed; I can tell you this is how we think about it,\u201d he said. \u201cAnything that we do before, during, or after the election will be based on the data, the outlook, and the balance of risks and not on anything else.\u201d<\/p>\n Even if interest rates did get cut before the election, their impact on everyday people may be limited and indirect. A cut would ease some pressures on borrowing costs, but its full effect would take months to flow through the economy to impact interest rates for things like auto loans, mortgages, and bank loans. A cut in September<\/a> would only leave about a month and a half before Election Day, hardly enough time for meaningful macroeconomic change.\u00a0\u00a0<\/p>\n The consensus is that \u201cFed rate movements take approximately eight to-12 months to have a widespread economic impact,\u201d said Kathleen Grace, CEO of Fiduciary Family Office<\/a>, a firm that manages the personal wealth of high net worth individuals. \u201cHowever, what consumers typically experience is a more immediate market reaction to changes in policy.\u201d\u00a0<\/p>\n There is a minority of analysts that believe there are economic reasons the Fed will wait<\/a> until after the election. They consider the current labor market to be too strong to justify a rate cut, according to Scott Helfstein, head of investment strategy at Global X<\/a>, an ETF provider with about $40 billion in assets under management. \u201cWe believe the market may still be too optimistic around a September cut,\u201d he said in an email. \u201cOne cut in December remains our base case unless the next two job reports show a material slowdown in the labor market.\u201d<\/p>\n Meanwhile, as the Democrats and Republicans bicker over whether the Fed is too political or whether September is the right time for a rate cut, Powell reminded everyone the central bank hadn\u2019t made up its mind one way or the other. \u201cI don\u2019t know what the data will reveal,\u201d Powell said.\u00a0\u00a0<\/p>\n Will Daniel contributed reporting to this article.<\/em><\/p>\n<\/div>\n\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n