(Bloomberg) -- President Joe Biden said businesses and consumers should feel greater confidence in the economy a day after the Federal Reserve slashed interest rates — and that he expected rates to go down further — as he sought to burnish his economic legacy and bolster the candidacy of Vice President Kamala Harris against Republican Donald Trump.
Biden cast the Fed’s decision to lower rates as a vindication of his stewardship of the nation’s post-pandemic economic recovery and a sign of progress in the fight against high inflation that has been one of his — and Harris’ — biggest political liabilities.
“That’s good news for consumers, and it means the cost of buying a home, a car and so much more will be going down. And it’s good news in my view for the overall economy, because lower borrowing costs will support economic growth,” Biden said in an address Thursday at the Economic Club of Washington, where he appeared with Carlyle Group co-founder David Rubenstein.
“It’s an important signal from the Federal Reserve to the nation that after repeated interest hikes to cool down inflation, inflation has come back down and the Fed has switched to lowering rates to keep the country growing, the economy growing,” he added.
The president’s remarks come after the central bank lowered its benchmark interest rate by half a percentage point, marking a policy shift aimed at bolstering the US labor market.
“This is a moment in my view for business to feel greater confidence, to invest, hire and to expand. It’s a moment for individuals to feel greater confidence buying a home, a new car, starting a family, starting a new business,” Biden said.
Fed Independence
The president also delivered a jab at Trump and and the Republican’s allies, who have criticized the timing of the Fed’s decision so close to Election Day and accused the central bank of playing politics.
“Unlike my predecessor, I respect the Federal Reserve’s independence,” Biden said. “That independence has served the country well.”
Biden said “it would also do enormous damage to our economy if that independence is ever lost.”
The president also claimed he had never spoken to Federal Reserve Chair Jerome Powell in office, although the two have met during Biden’s tenure.
Powell has pledged not to allow political pressures to influence decision making at the central bank.
Earlier: Trump, Harris Angle to Gain Political Edge From Fed Rate Cut
Trump’s repeated broadsides against the central bank — including accusing the bank of working against him and saying he could do a better job on monetary policy and interest rates than Fed officials have raised concerns about whether he would ramp up pressure on the central bank if he wins the election.
Trump on Wednesday cast the rate cut as a “very unusual number” and bad news for Harris, regardless of the Fed’s motivation.
“I guess it shows the economy is very bad, to cut it by that much, assuming they’re not just playing politics,” Trump said.
Economic Legacy
Biden on Thursday tried to downplay the idea that he was declaring victory on inflation, saying the work to combat high prices was not done, even as he touted legislative measures during his term such as the Inflation Reduction Act to help control costs for households — and noting Harris’ role casting the tiebreaking vote for it in the Senate.
The president’s advisers sought to highlight that message ahead of his speech.
“This is not meant to be a declaration of victory. It’s meant to be a declaration of progress, significant progress,” White House Chief of Staff Jeff Zients said in a briefing with reporters on Wednesday.
Earlier this week, Biden’s top economic adviser Lael Brainard downplayed the risk of a re-emergence of inflation as policymakers shift their focus toward protecting the job market. She said the US economy had reached a “turning point” and suggested lower market interest rates could help address high housing costs.
The cut announced on Wednesday was the first reversal since the central bank brought its benchmark to a two-decade high in July 2023, and came as inflation had cooled to 2.5% while unemployment had risen to 4.2%. The move could be a boon particularly for homebuyers, who have struggled with high mortgage rates.
Brainard said Wednesday that the rate cut sends “a clear signal that inflation has come back down. Interest rates are coming down, and the focus now is on sustaining the important gains on employment and incomes.”
Yet the difficulty of selling Americans on a rosy economic picture was underscored in the statement issued by Harris even as she welcomed the Fed’s decision.
“I know prices are still too high for many middle class and working families, and my top priority as president will be to lower the costs of everyday needs like health care, housing, and groceries,” Harris said.
--With assistance from Josh Wingrove.
©2024 Bloomberg L.P.
