Interest rate cuts: A controversial move by the Fed.

Federal Reserve Chairman Jerome Powell at a press conference on September 18 - Photo: REUTERS

According to a statement on September 18, the Fed decided to cut the overnight lending rate by 50 basis points (0.5 percentage points), keeping it in the range of 4.75-5%. This easing policy will continue on a path to bring this rate down to around 3-3.5% by the end of 2026.

The U.S. economy is in good shape, and our decision today is aimed at maintaining that state.

Fed Chairman Jerome Powell

Safe landing?

This marks the first interest rate cut by the US Federal Reserve (Fed) in over four years. Since the early days of the COVID-19 pandemic (2019), the US central bank has raised interest rates to curb inflation, aiming for a "soft landing".

This concept is used by economic analysts to describe lowering inflation without pushing the economy into recession. Specifically, the Fed's task is to bring inflation down to around 2% while keeping the unemployment rate low.

The Fed's move means the prospects for a "soft landing" have brightened. The decision comes as inflation in the US shows positive signs, but the major issue remains the worrying unemployment situation.

In fact, in a statement last month, Fed Chairman Jerome Powell mentioned the job market when affirming the organization's "mission" to pull the US economy out of the inflation shock. "We will do everything we can to support a strong labor market as we make further progress toward price stability," he said.

Economists have differing views on the Fed's move. Some see it as good news for President Joe Biden, who has struggled with record inflation in the U.S. Others believe the interest rate cut shows that prolonged suppression of inflation has left the U.S. economy in dire need of a boost. Most believe the U.S. economy will not fall into recession, but significant challenges remain.

Interest rates and elections

The Fed's decision to keep interest rates high and then drastically lower them now raises many questions about its impact on the 2024 US presidential election.

This is good news for President Biden's Democratic Party and nominee Kamala Harris, who will be credited with controlling inflation. Lower interest rates, leading to reduced investment or spending costs, are also a positive signal for voters just months before Election Day.

Conversely, the American media immediately preemptively warned of the possibility that the Republican Party would accuse the Fed's decision of being politically motivated, specifically of "helping" the Democratic Party right before the election.

Nevertheless, most American newspapers argue that this is purely an economic decision, with no evidence of political involvement. The Conversation argues that in a highly diversified economy, lowering interest rates might please some groups, but other investors, such as those in the currency market, would not see it as a positive development.

Furthermore, both Harris and her opponent Donald Trump have reason to capitalize on this move to their advantage. While Democrats might readily accept any praise for bringing inflation back on track, Republicans could also use it to argue that the Fed's interest rate cuts are a sign of a desperate economic downturn under Biden, a consequence of the Biden-Harris administration's policies.

Meanwhile, CNN asserted that the Fed's interest rate cuts would have no impact on the election. Jason Furman, who served as chief economist under President Barack Obama (Democrat), analyzed that these cuts would not create a change in economic behavior until 2025.

"This has virtually no impact on the economy before the election. The market is already like this, and it's a long way from affecting things like unemployment, GDP, or inflation," he told CNN.

In the past, Republican President George H.W. Bush witnessed economic growth of 5.8% in the three months immediately following an election. However, the unemployment rate surged to 7.8% in June 1992. That was when Bill Clinton's Democratic party coined the famous slogan "It's the economy, you idiot" to try and persuade voters to overturn Bush and elect Clinton.

The Trump Organization is seeking investment opportunities in Hung Yen.

Speaking to Tuoi Tre newspaper on September 19th, Mr. Nguyen Hung Nam, Vice Chairman of the People's Committee of Hung Yen province, confirmed that the Trump Organization (USA), owned by former US President Donald Trump, had visited Hung Yen province and expressed its desire to cooperate and invest in the province in the construction of hotels, golf courses, and entertainment complexes.

However, everything is still in the exploratory stage regarding investment cooperation opportunities, and the Trump Organization has not yet proposed a specific amount of capital or investment location in the province.

On September 16th, representatives from the Trump Organization held a meeting with the Secretary of the Provincial Party Committee and the Chairman of the People's Committee of Hung Yen province, following a proposal from Hung Yen Investment and Development Group Joint Stock Company. During the meeting, Mr. Tran Quoc Van, Chairman of the People's Committee of Hung Yen province, expressed his hope that the Trump Organization would explore investment options in the province in the future.

Speaking at the meeting, Mr. Nguyen Huu Nghia, Secretary of the Hung Yen Provincial Party Committee, said that the province will create favorable conditions within the legal framework for the Trump Organization to explore and promote investment cooperation. The province will assign relevant departments and agencies to closely coordinate with central agencies to support the group in promoting investment in Hung Yen province to achieve the highest efficiency.

Source: https://tuoitre.vn/cat-giam-lai-suat-dong-thai-gay-tranh-cai-cua-fed-20240919214256664.htm