Biden stresses Fed independence after interest rate cut

WASHINGTON — President Joe Biden touted progress on the economy in a wide-ranging speech at the economic club in Washington, D.C. on Thursday. 

Biden’s speech comes after a half-point rate cut announced by the Federal Reserve on Wednesday, the end of a long post-pandemic tightening cycle. 

The timing of the cut is fortuitous for the Democratic party, as it should ease economic pain right before what still looks to be a tight election between former President Donald Trump and Vice President Kamala Harris in November. 

Democrats have struggled to gain the upper hand on the economic narrative, with higher prices persisting throughout Biden’s presidency. Democratic lawmakers have urged the Fed to lower rates, especially considering weaker than expected growth in the labor market. 

Biden, however, emphasized the importance of the Fed’s political independence. 

“By the way, I’ve never once spoken to the chairman of the Fed since I became president,” he said. “It’ll do enormous damage to our economy if that independence is ever lost.” 

In doing so, Biden sought to draw a bright line between himself and Trump, who frequently criticized the actions of the Fed during his administration, and has suggested that he would seek a greater role in the Fed’s decisions. 

“The President has always respected the Federal Reserve’s independence to bring down inflation,” said White House chief of Staff Jeff Zients in a call with reporters before Biden’s speech. “That’s in stark contrast to his predecessor.” 

Trump suggested, without evidence, that the rate cut could be politically motivated. 

“I guess it shows the economy is very bad to cut it by that much, assuming they’re not just playing politics,” he reportedly said at Bitcoin themed bar in New York. “The economy would be very bad or they’re playing politics, one or the other. But it was a big cut.”

Powell nodded to the Fed independence dynamic during his press conference on Wednesday. 

“We’re not serving any politician, any political figure, any cause, any issue, nothing,” Powell said. “It’s just maximum employment and price stability on behalf of all Americans. It’s a good institutional arrangement which has been good for the public. I hope and strongly believe it will continue.”

The speech comes as the Harris campaign and Democratic policymakers more broadly seek to take credit for positive aspects of the economy — despite a widespread public perception that the economy is on the wrong track.