After cutting interest rates just weeks after the November presidential election, the Fed now leaves a ticking inflation “time bomb” for the incoming Trump administration to defuse.

Price increases accelerated in October, november Following the Fed’s decision to cut interest rates by 0.50% on September 18, the Biden-Harris administration appears to be leaving an “inflation mess” for President-elect Donald Trump following two consecutive months of high inflation data. . September’s rate cut is nothing more than an act of “election interference” aimed at boosting Vice President Kamala Harris’ chances in November, experts told the Daily Caller News Foundation. (Related: ‘Disastrous Burden’: Rose-colored spin on Joe Biden’s economic legacy ignores reality)

“The Fed interfered in the election by cutting interest rates right before the election without any empirical justification,” E. J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Herman Center on the Federal Budget, told DCNF.

September’s rate cut was a departure from recent Fed precedent, coming after the Federal Open Market Committee (FOMC) held off on adjusting interest rates eight times in a row, and was the first rate cut by the FOMC. . lowered Rates increase in approximately 4 years. The election also took place during an election in which the economy ranked as the No. 1 most important issue for voters, with 54% of voters favoring Mr. Trump over Vice President Kamala Harris on this issue. According to In an October Gallup poll.

Lower interest rates would lower borrowing costs and increase access to capital for businesses and consumers alike, potentially boosting gross domestic product (GDP) and stock markets. Since 1928, when the S&P 500 stock index rises, the incumbent party wins the presidential election 83% of the time. positive performance Within three months of Election Day.

Half price point reduction for September exceeded The Fed’s usual 0.25% increments come in response to past tensions between Fed Chairman Jerome Powell and President Trump, with the president-elect telling Fox Business host Larry Kudlow in August 2023 that if He said he would not reappoint Powell even if elected. The rate cut also sparked dissent within the FOMC, with Michelle Bowman, a member of the Federal Reserve Board of Governors, speaking out against the decision, calling it a “premature declaration of victory” against inflation.

“The first small movement in this process is [of lowering rates] That would have been a desirable move. ” Bowman wrote in his Sept. 20 book. be against. “While it is important to recognize that meaningful progress has been made in reducing inflation while core inflation remains around or above 2.5%, the Committee’s larger policy actions are a premature declaration of victory for price stability. I see it as being at risk of being construed as a “delegation”. “

During the Biden-Harris administration, all the very smart people running the U.S. economy had a habit of quietly revising after optimistic numbers. After all, the first headline is all that matters. pic.twitter.com/k7LbgJnxxB

— Daily Caller (@DailyCaller) November 1, 2024

Peter C. Earle writes, “Trump is inheriting an economy with higher-than-average inflation, and the Fed is likely to find it most difficult to fight inflation, from about 3% to 2%.” It’s in the “last mile” of returning.” , a senior economist at the National Bureau of Economic Research, told DCNF about the November CPI data.

The final stage of the inflation struggle in many cases This is the most difficult because price declines for certain items take longer to be reflected in the data than others. For example, rents are typically fixed for the duration of the lease, creating a lag between new lease prices and rental inflation data. So even if new lease prices are stagnant or the data is falling, it could show that shelter prices continue to rise.

But shelters accounted for an increasingly smaller share of the top line of inflation, dropping from about 90% of the monthly increase in July to less than 40% in November. According to According to Bureau of Labor Statistics (BLS) data released Wednesday. Meanwhile, goods inflation, which is the rise in prices of tangible items such as cars and food, is on the rise again, with prices of used cars and trucks rising from -2.3% to 2.7% and 2% on a monthly basis in October and November, respectively. rose. % in July.

BLS data shows a similar trend for groceries, which rose 0.5% month-over-month in November after rising only 0.1% month-over-month in October.

“The brief respite in commodity inflation is over and we are once again seeing widespread price increases,” Antoni told DCNF regarding recent price increases. “This is deeply worrying and lies beneath the surface for inflation advocates who have previously excused the hot inflation numbers as a temporary increase in just a few categories.”

President Joe Biden said in July that his “legacy to Gen Z” is to “fix the economy” after annual inflation fell to 3% in June from a peak of 9.1% in June 2022. ” he said he hopes.

Officials close to the White House, including Bharat Ramamurti, who served as deputy director of the National Economic Council under the Biden administration, echoed the president’s sentiments. write “We have won the war on inflation,” he said in an Aug. 1 post. “It’s time for the Fed to start cutting rates.”

But Earl told DCNF the economy is far from recovering. “The U.S. economy is currently in a precarious position. Yes, inflation is down, but prices are still rising faster than the Fed would like, and along with high interest rates, they are creating economic hardship for American families.” Therefore, the savings rate of the American people. The unemployment rate is rising, and the time it takes for unemployed people to find a new job is increasing.The labor force participation rate is also falling. This has happened since the Biden administration took office.

Just six days ago, Biden said he would “fix the economy”…but is this what he means by “fixing” it? pic.twitter.com/M5xSUU6kCn

— Daily Caller (@DailyCaller) August 5, 2024

Prices have increased more than 20% since Biden took office in January 2021, with prices for everyday items such as eggs and butter increasing by about 163% and 50% from November 2020 to September 2024, respectively. rose. Rising costs are weighing on American bank accounts, squeezing savings rates (the ratio of people’s savings to their income). keep For future use — down from 32% in April 2020 to 4.4% in October According to to the Federal Reserve Bank of St. Louis (FRED).

Meanwhile, the unemployment rate rose to 4.2% in November 2023 from 3.4% in April 2023, according to FRED data. show,and average duration The unemployment rate was at 23.7 weeks, the longest period since April 2022.

Antoni: Trump has inherited a ticking time bomb I wrote X on Friday. “The new management is really committed to cleaning up this inflationary mess.”

The Fed is expected to cut rates again at Wednesday’s FOMC meeting, with about 95% of interest rate traders expecting a 0.25% cut. According to Go to CME Group’s FedWatch tool.

The White House did not respond to DCNF’s request for comment. The Fed declined DCNF’s request for comment.

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