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Federal Reserve

Interest rates in spotlight as progressives call for cuts

The Federal Open Market Committee will announce its first interest rate move of 2024 this afternoon. We’re not expecting them to cut rates quite yet — but that won’t make the politics easier to navigate.

The Federal Reserve’s exact approach to interest rates in the coming weeks is already a singular fixation for Wall Street and much of Washington. Investors expect the Fed to hold rates steady at 5.25% and 5.5% after today’s meeting. It’s the next meeting where things get interesting; Fed watchers are roughly split on whether we see rates cut in late March.

We’ve written a lot about whether this year’s election will be about the economy. But what about the Fed itself? The institution’s monetary policy moves act as giant, clunky brakes that can slowly crimp or unleash economic activity.

Federal Reserve Chair Jay Powell has been adamant that central bank officials “don’t think about politics.” But even so, these are decisions that could pose massive political consequences.

A roaring economy, particularly one frothed by rate cuts, tends to be pretty good for incumbents’ reelection odds. Former President Donald Trump is clearly aware of that.

But Republicans are skeptical that the Fed’s role in the economy could become a campaign issue this year. “It’s going to be a sideline issue,” Rep. Blaine Luetkemeyer (R-Mo.) told us. “I don’t think it can be a main issue.”

Democrats have their own worries: Lawmakers including Senate Banking Committee Chair Sherrod Brown (Ohio), Sens. Elizabeth Warren (Mass.), Jacky Rosen (Nev.), Sheldon Whitehouse (R.I.) and John Hickenlooper (Colo.) called this week for the Fed to cut rates, pointing to the costs of housing.

Warren told us these fired shots are “not about politics.”

“The economic well-being of American families depends in part on what they can afford, and when they can’t afford housing, that is a problem that the Fed, by law, should be paying attention to,” Warren said.

Senate Republicans, meanwhile, are content to stand back and watch for now. “The Federal Reserve needs to stay true to its mission,” NRSC Chair Steve Daines said Tuesday night. “They should not be listening to the politicians.”

— Brendan Pedersen

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