It’s starting to look like a clash is brewing in Washington between the chairman of the Federal Reserve Bank and the President of the United States as we get closer to the midterm elections on November 3rd.
Some investors have been betting that the Fed will raise interest rates in the next month or two to be certain that inflation is under control, but the new Fed chairman may be taking on President Donald Trump if he does so.
President Trump has made it clear that he wants the chairman, who just took over the job May 22nd, to make lower interest rates a major priority, so raising rates anytime soon, even if Warsh thinks it’s most important, won’t go over well with the White House.
Derrick Kinney, author of the book “Good Money Revolution,” says raising interest rates before November could be a worst-case scenario for Republicans who trying to hold onto their majorities in the US House and Senate.
“But we still have higher inflation than the Fed Chairman wants, and so raising interest rates may be the best way to curb that,” Kinney says.
The public already sees their wallets and pocketbooks being squeezed by higher prices across the board, so raising interest rates could help bring down inflation, but it will continue to tighten the economy so consumer might not feel better about the economy until well after the election.
“Right now a public perception of an interest rate raise may be the last thing that the Republican party wants, especially heading into the November election.”
And Kinney adds that so far President Trump has been supporting Chairman Warsh, but “he does not want interest rates raised, and if Warsh, as his new employee, tries to raise rates then expect him to go to the wall against his new employee, criticizing his new appointee.”
Still, it’s likely that the American economy will see a lowering of interest rates within the next year, but some economists say probably not until 2027.