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By Jordan Fabian, Justin Sink and Christopher Condon
President Joe Biden said he stands by his prediction that the Federal Reserve would cut interest rates by the end of the year, despite a new report showing stubbornly high inflation.
“Well, I do stand by my prediction that, before the year is out, there’ll be a rate cut,” Biden said Wednesday at a White House press conference alongside Japanese Prime Minister Fumio Kishida. Biden said Wednesday’s report could delay a rate cut by at least a month but was ultimately unsure how the central bank would act.
A third consecutive month of higher-than-expected inflation data delivered a fresh blow to Biden’s reelection prospects ahead of November’s election, exacerbating concerns voters could punish Biden over high prices and delay hopes for Federal Reserve rate cuts the president has predicted.
But Biden defended his economic record while acknowledging persistent inflation.
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“Look we have dramatically reduced inflation from 9% down to close to 3% we’re in a situation where we’re better situated and we were we took office, where we inflation was skyrocketing,” Biden added.
By tradition, the White House typically does not comment on Federal Reserve decisions and the president has previously pledged to respect the bank’s independence. But last month, he said he foresaw the central bank easing rates.
Wednesday’s data, though, makes it harder to envision the Fed delivering on rate cuts before the election, a move that would add more juice to the stock market and make it easier for Americans to buy houses and cars and service their debts.
Treasury two-year yields surged while major groups in the S&P 500 retreated, signaling investor skepticism that the Fed will move in June. But if the Fed can’t cut by July, it’s following meeting comes in September.
At that point some economists believe the Federal Open Market Committee, the bank’s rate-setting panel, would wait until after the election to cut in order to avoid any appearance of trying to influence the outcome.
“One of Chair Powell’s responsibilities is to protect the public standing of the Fed,” said Vincent Reinhart, chief economist at Dreyfus and Mellon. “The closer the FOMC acts to the election, the more likely it is that the public will question the Fed’s intent.”
That’s bad news for Biden, whose reelection relies on invigorating suburban swing voters who have seen the prices of mortgages balloon over his tenure. The president has repeatedly offered the hopeful prediction in recent weeks that the Fed would cut rates while holding events designed to highlight his administration’s proposals to tackle rising housing costs.
Biden can ill-afford Americans souring further on their economic outlook, as he continues to trail former President Donald Trump in reelection polls. Despite robust employment throughout Biden’s tenure – including the addition of more than 300,000 new jobs in March – corresponding inflation has fanned angst among the electorate.
Voters said their personal financial situation was better off under Trump by a 16-point margin in last month’s Bloomberg News/Morning Consult poll of swing states. More than a third of voters said the economy was the single most important issue to them, while less than a third said the economy was on the right track.
Trump sought to push that advantage Wednesday morning in a post to his Truth Social platform.
“INFLATION is BACK—and RAGING! The Fed will never be able to credibly lower interest rates, because they want to protect the worst President in the history of the Untied States!,” Trump said.
Biden in a statement earlier Wednesday acknowledged the administration had more to do to lower prices.
“Prices are still too high for housing and groceries, even as prices for key household items like milk and eggs are lower than a year ago,” Biden said.
