Scribble

Jerome Powell, the unflappable Federal Reserve chair, would never march into a press conference, declare victory over inflation and drop the mic while giving a middle finger to his haters. That’s not his style. But in his own way (very demure, very mindful) that is what happened Wednesday when he announced the Fed’s first rate cut in four years, a giant half-point reduction that will lower the cost of borrowing and offer financial relief for consumers and businesses. “Our patient approach over the past year has paid dividends,” Powell said, in perhaps the most understated boast ever uttered by a public official. (And even then, he toned it down later, noting: “We’re certainly not saying ‘mission accomplished’ or anything like that.”) Still, the overall message from the central bank chief was clear: “The US economy is in a good place, and our decision today is designed to keep it there.” In a parallel universe, everyone would agree to be happy that the pandemic-ravaged economy is finally returning to a healthy equilibrium. But this is America, 48 days before a national election. So everything is political, even the routine monetary policy adjustments of the fiercely nonpartisan, independent Fed. On Wednesday, Republican Sen. Tommy Tuberville of Alabama called the decision “shamelessly political,” arguing the central bank “is clearly trying to tip the balance in favor of Kamala Harris.” While it’s true that the rate cut could help the vice president, it’s far from clear whether voters will be swayed by interest rate changes that take months to ripple through the economy. “It’s barely going to affect any aspect of the economy before Election Day,” economist Jason Furman told CNN. “It’s already priced into the market, and it’s way too soon to affect something like unemployment, GDP or inflation.” Former President Donald Trump responded Wednesday with his own spin. “I guess it shows the economy is very bad to cut it by that much, assuming they’re not just playing politics,” he said while visiting Pubkey, a bitcoin-themed bar in New York City. “The economy would be very bad or they’re playing politics, one or the other,” Trump said. (Just to clarify: The Fed does cut rates when the economy is “bad,” like when the pandemic forced us into lockdown. But in this case, the cuts are more akin to taking your foot off the brake rather than hitting the gas.) The irony of all the political hand-wringing is that Powell is arguably the least openly political public figure in the federal government. He’s a registered Republican, appointed by Trump and reappointed by President Joe Biden, who made his name in private equity — not exactly an industry teeming with secret lefties. Unlike his predecessors, Powell isn’t an economist. He is a lawyer who moved into investment banking in the 1980s (who didn’t, honestly?) before joining the Fed’s Board of Governors under President Barack Obama. Whenever a reporter asks him about politics, Powell refuses to bite. Like on Wednesday, when he was asked whether the half-point rate cut had political motivations, he responded with something approaching exasperation. “This is my fourth presidential election at the Fed and it’s always the same … Our job is to support the economy on behalf of the American people,” he said. “It is something we all take very, very seriously. We don’t put up any other filters.” Later, he put a finer point on it. “We’re not serving any politician, any political figure, any cause, any issue, nothing. It’s just maximum employment and price stability on behalf of all Americans.” Of course, that’s unlikely to stop either party from using the rate cut news to their advantage, given that the economy is the No. 1 issue for Americans going to the polls on November 5. Harris can hold it up as a capstone achievement for the Biden presidency after inheriting an economy wrecked by the pandemic. Trump can continue to claim that a rate cut is a sign the economy is weak. “No matter what Powell does, somebody’s going to complain,” Steve Sosnick, chief strategist for Interactive Brokers, told me. “I think he’s handled this really well, and that’s why the markets have certainly voted in his favor.” He added: “I don’t know that a Fed chairman could ever spike the football, even if he scores a touchdown.”