On Wednesday (September 18th), the Federal Reserve ended its monetary tightening policy and decided to cut interest rates significantly by 50 basis points, which is twice the usual rate cut. The two major party candidates for the U.S. presidential election have each expressed their views on this decision.
Although investors had anticipated the size of this rate cut, in part due to a lot of media reports pointing in this direction before the Federal Reserve’s decision was announced, the move still defied the expectations of many economists, who were leaning towards a 25 basis point cut.
Initially, this decision boosted the stock market, with the Dow Jones Industrial Average briefly rising by 375 points and the S&P 500 index gaining 1%, setting new intraday highs.
However, the substantial interest rate cut also raised concerns among some investors that the Federal Reserve may have initiated loose monetary policy too late, leading to worries about the U.S. economic outlook. Ultimately, before the close of the market, the Dow Jones Industrial Average fell by 103.08 points or 0.25%, the S&P 500 index dropped 16.32 points or 0.29%, and the Nasdaq index declined by 54.76 points or 0.31%. Tech stocks performed relatively weakly, with Nvidia falling by nearly 2% and the Philadelphia Semiconductor Index dropping by over 1%.
Former U.S. President and Republican candidate Trump also believes that the Federal Reserve’s significant interest rate cut indicates that the U.S. economy is in trouble.
On Wednesday, Trump visited a “Bitcoin-themed” bar named PubKey in New York City. Earlier this week, Trump and his sons announced their cryptocurrency platform, “World Liberty Financial.”
During his visit, Trump was asked about the Federal Reserve’s 50 basis point rate cut earlier that day. Trump said, “I think, if they are not playing political games, such a large rate cut indicates that the economy is in a very bad state.”
“The economy will be very bad, or they are playing politics, one of the two must be true. This is a very significant rate cut,” he said.
The new federal fund target rate range has been lowered to 4.75% to 5.00%, signaling that the Federal Reserve believes the war against inflation is coming to an end.
Federal Reserve policymakers expect the benchmark rate to drop by another 0.5% by the end of this year, another full percentage point next year, and another 0.5% by 2026. However, they emphasize that there will inevitably be uncertainties when discussing far-off future prospects.
The Federal Reserve’s rate cut less than 50 days before the election has left some Republicans dissatisfied because Trump and his campaign team have been focused on America’s high prices and people’s economic disappointment.
Vice President of the United States and Democratic presidential candidate Harris said in a statement on Wednesday, “For Americans who are deeply troubled by high prices, this is a welcome news, but my focus is to continue reducing prices.”
Harris added, “I know that for many middle-class and working families, prices are still too high. If elected president, my top priority will be to reduce the costs of daily necessities such as healthcare, housing, and groceries.”