The Federal Reserve is preparing to announce its first interest rate cut in more than four years on Wednesday, just weeks before the U.S. presidential election.
The anticipated move comes as inflation begins to ease towards the central bank’s target of 2%, and the labor market shows signs of cooling.
Fed Chair Jerome Powell and other senior officials have signaled that a rate cut is likely. However, the size of the reduction—whether 25 or 50 basis points—remains under debate among policymakers.
The decision, expected after the Federal Open Market Committee meeting on Tuesday and Wednesday, will be based on current economic data, in line with the Fed’s mandate to maintain stable prices and maximize sustainable employment.
However, the timing of the rate cut, less than two months before the election, has raised concerns about potential political implications. Former President Donald Trump is running for re-election against Democratic Vice President Kamala Harris, creating a politically charged environment.
Despite the Fed’s commitment to acting independently, some experts, like Alicia Modestino, an economics professor at Northeastern University, acknowledge the challenge of maintaining this neutrality during such a volatile political period.
