Fed Rate Cuts: An Optimistic Indicator, According to Yellen
09:56 19/09/2024 - PesoMXN.com
For U.S. Treasury Secretary Janet Yellen, the Federal Reserve’s (Fed) announcement to cut interest rates is a "very encouraging sign" for the American economy. The Fed made a cut on Wednesday for the first time since 2020, lowering the benchmark interest rates by half a percentage point to a range of 4.75% to 5.00%, just before the presidential elections in the US.
Yellen stated that this action "demonstrates the Fed's confidence that inflation is coming down and approaching the 2% annual target, as well as the fact that inflationary risks have significantly diminished." During an event in Washington, she added that the labor market remains strong. From her perspective, the U.S. economy is experiencing what is referred to as a soft landing, meaning a moderation in inflation without slipping into recession. Following the announcement, former President Donald Trump, who is seeking the presidency again in the November 5 elections, suggested that the Fed's decision could be politically motivated. "This shows that the economy isn't doing well if a cut like this is needed," Trump said in an interview from New York. In response, Vice President Kamala Harris, a Democrat, remarked that it was "good news for Americans," while the White House stated that the economy is at a "moment of progress." This central bank decision makes credit more affordable for individuals and businesses, which is favorable for the administration of Joe Biden and Harris in the weeks leading up to the elections. Jerome Powell, the Fed chair, clarified at a press conference: "We are not serving any political figure."
The Fed’s decision to lower interest rates can be seen as a strategic move at a critical time. Lower rates could stimulate economic growth by making credit more accessible, but it’s also important to consider how this impacts inflation and long-term economic stability. Careful monitoring of the economic situation will be crucial to avoid future imbalances. Confidence in the health of the economy will depend on how this monetary tool is managed in the current context.
