The Federal Reserve may cut interest rates for the first time in more than 4 years on September 18. However, policymakers can debate how big a move it can prove to be with less than two months left for the US presidential election. US central bank Federal Reserve Chairman Jerome Powell and several other bank officials have indicated in recent weeks that interest rates could be cut this month.
In fact, inflation has reached the bank’s long-term target of 2 percent and the sluggishness in the labor market continues. The Federal Reserve has the responsibility of both keeping prices stable and taking measures to provide employment while working independently. The US central bank has repeatedly said that it will decide to cut interest rates only on the basis of economic data. However, the rate cut on September 18 can also be a headache for Powell, as it will happen just before the US presidential election, where Kamala Harris from the Democratic Party is in the electoral fray against former President and Republican Party candidate Donald Trump.
How big will the cut be?
If any cut happens, it will be the first cut by the Federal Reserve since March 2020, when the Federal Reserve cut interest rates to support the US economy during Covid.
The Federal Reserve started raising interest rates in 2022 after inflation picked up. The central bank has kept the interest rate between 5.25% and 5.50% for the last 14 months, which is the highest level in the last 14 months. Since now inflation is falling, unemployment is rising and the US economy is also growing, policymakers feel that the time is favorable for cutting interest rates.
