Jerome Powell is set to take plenty of partisan fire this week if he, as expected, sends a signal that the fight against inflation is nearing an end with an interest rate cut — the first one in four years.
That appears to be just fine with him.
The political winds can quickly shift, of course. But the Federal Reserve chair has put himself in a stronger-than-expected position: The central bank he oversees appears likely able to neutralize critics in the days ahead, even as it nears the climax of a year where it has had to navigate not only a complex economic picture, but a heated 2024 election as well.
Under debate is a decision 14 months in the making about when and how aggressively to begin bringing down interest rates. Powell and his colleagues appear to be deciding between whether to cut rates by 25 or 50 basis points when they meet this week.
Either option appears right in the middle of an array of political voices.
Chair of the Federal Reserve of the United States Jerome Powell during a Senate hearing in July. (Bonnie Cash/Getty Images) ·(Bonnie Cash via Getty Images)
Sure, former President Donald Trump will likely lambaste any sort of Fed "pivot" just weeks before an election. But Trump has been mixed in his critiques of Powell as of late, and his campaign is more focused on lowering interest rates.
Perhaps most tellingly, Trump himself has been ignoring the central bank recently to focus elsewhere, and the topic didn't even come up at last week's debate with Vice President Kamala Harris.
Powell is also set to be dinged from the left for, in their view, waiting too long. On Monday, three Democratic senators, including Elizabeth Warren of Massachusetts, even urged a 75 basis point cut.
So they’re also likely to be left unsatisfied.
Perhaps most important for Powell, as the economic evidence piles up in favor of a cut, is that a wide swath of the political spectrum in both parties is already signaling that it's just fine with the central bank's widely anticipated move.
Whether or not the Fed's strategy is right for the economy remains to be seen. But purely on the politics, as the old expression goes, getting attacked from both sides means you might be doing something right.
Has Powell 'gotten it wrong a lot'?
For Trump and his allies, recent months have been notable for criticisms of Powell that have gotten more diffuse as the economic case for cuts has gotten harder to deny.
Donald Trump's last comment on the Fed came last month, when he offered that Powell has "gotten it wrong a lot". But the former president also seems to be undecided on how Powell was wrong, adding, "He's tending to be a little bit late on things, he gets a little bit too early and a little bit too late."
It seemed to be a shift in tone for Trump from earlier this year, when his attack on Powell was more straightforward. He told Bloomberg in June that cuts are something "they know they shouldn't be doing". That came after a February Fox Business interview, when Trump said of cuts, "I think [Powell's] going to do something to probably help the Democrats."
As of Monday afternoon, Trump doesn’t appear to have posted online or commented on the Fed for weeks, and a comment from his campaign focused more on lowering rates than past charges of politicization at the Fed.
"Kamalanomics has led to the fastest increase in mortgage rates since 1981," charged RNC Spokesperson Anna Kelly in a statement, adding that Trump will "quickly bring down mortgage and interest rates."
Former President and Republican presidential candidate Donald Trump raises a fist on stage during a campaign rally in Las Vegas on Sept. 13. (PATRICK T. FALLON/AFP via Getty Images) ·(PATRICK T. FALLON via Getty Images)
Some key Trump allies have even directly broken with him on the issue. A recent Politico article found many top GOP lawmakers openly saying lower interest rates are needed now.
"It is time for a rate cut," Sen. John Kennedy of Louisiana told the outlet. The staunch Trump ally added that "this economy — particularly the labor market — is softening very, very, very quickly."
Meanwhile, on the left...
The central bank's efforts to push back on the political attacks from Trump could also be helped by ongoing critiques coming from the left.
Some liberal voices have long been critical of the Fed — and there's even a camp arguing that a 75 basis point cut is the way to go.
“Employment numbers adjust slowly, so the Fed should front-load rate cuts to avoid sliding towards a potential crisis,” wrote Sens. John Hickenlooper, Warren, and Sheldon Whitehouse in their Monday note urging for a bigger cut.
The growing critique from those Senator and others on the left is that a too-slow Fed could increase the chances of a recession.
"You're really flirting with a potential disaster," former Fed economist Skanda Amarnath said of a smaller interest rate cut, speaking during a media briefing on Monday. Amarnath, who is executive director of a group called Employ America, added that "it makes a lot of sense for the Fed to move a little more decisively."
Powell is all but certain not to comply, with traders currently split on whether to expect a 25 or 50 basis point cut. They ascribe a 0% chance of any other outcome this week.
Senator Elizabeth Warren prepares to take the stage during a Labor Day event earlier this month. (Jessica Rinaldi/The Boston Globe via Getty Images) ·(Boston Globe via Getty Images)
As for the White House, Powell is unlikely to hear publicly from the current administration this week, with Harris recently reiterating her desire to let the Fed operate independently.
And White House National Economic adviser Lael Brainard offered in a speech at the Council on Foreign Relations Monday that President Joe Biden "made a clear commitment to respect the independence of the Federal Reserve in fighting inflation."
Others have noted that if Powell were looking to influence the 2024 election, he would have cut rates sooner.
"The only debate about politics among non-partisan Fed watchers & people with real money at stake is whether the Fed would be SLOWER to cut rates for fear of the PERCEPTION of politicization," said Harvard's Jason Furman, in a recent extended social media post about why he thinks the central bank is avoiding electoral considerations and any critiques are "unserious political noise."
For his part, Powell has long maintained he isn't paying attention to all the noise, anyway.
After the last Fed meeting, a reporter asked if the Fed could remain apolitical through the rest of the election season.
"I absolutely do," he quickly responded, adding that he and his colleagues would remain focused on the economy alone. "We don't change anything in our approach to address other factors, like the political calendar."
Ben Werschkul is Washington correspondent for Yahoo Finance.
