November’s Fed meeting will move to avoid Election Day
November’s Fed meeting will move to avoid Election Day
It happens like clockwork: Federal Reserve meetings on interest rates always start on a Tuesday and end on a Wednesday with a press conference — like the one today. But the next meeting in November will start on a Wednesday to avoid Election Day.
So what generally happens regarding interest rates in election years?
If you’re keeping score, over the past eight presidential elections, the Fed has cut interest rates in four election years, raised them in three and left things unchanged in 2012.
“The Fed might want to duck out of the wind, but they don’t,” said Sarah Binder, a professor of political science at George Washington University.
Fed officials resisted pressure from former President Donald Trump to lower rates before the pandemic, she said. “Their legitimacy depends on a reputation for nonpartisanship, even though they live in a very partisan political system.”
In the 1960s and ’70s, it was much more common for presidents to browbeat Fed chairs. Presidents Lyndon B. Johnson and Richard Nixon pushed for rate cuts to goose the economy right before elections.
Gary Richardson was a historian at the Fed and is now at the University of California, Irvine. In the late ’70s, he said that legislation established that the Federal Reserve report to Congress and that the central bank’s job is to keep inflation in check with as many people working as possible.
“These institutional changes in the ‘70s really helped to cement the Fed’s independence from the executive branch,” he said.
You really don’t want the White House in charge of interest rates, Richardson added. Because if you just lower them in an election year regardless of what’s best for the economy, you might overheat it and have to increase rates later to cool things down.
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