The Cutting Edge
The Federal Reserve on Wednesday cut its short-term interest rate for the first time in four years—a sign that the central bank no longer views inflation as the economy’s primary challenge.
The Fed’s Open Market Committee approved a cut of 50 basis points (a 0.5 percent reduction in interest rates). In a statement, the committee said that the move was made due to “greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
“After four years of upheaval, the U.S. now seems to have low inflation, low unemployment, and solid economic growth,” concluded The Wall Street Journal‘s Greg Ip, who applauded the Fed’s move. The stock market seemed similarly pleased by the change.
The rate cut should mean some relief for consumers looking to make big purchases. Rates for mortgages, car loans, and other forms of borrowing are determined, in part, by the Fed’s target rates. Lower mortgage rates could indirectly help bring more supply to the housing market, which is good news for prospective buyers, The Washington Post reported.
With unemployment ticking upward in recent months—it has been at least 4 percent since May—an interest rate cut could also be viewed as the Federal Reserve pivoting away from a sole focus on getting inflation under control. After all, the Fed has a dual mandate to keep both inflation and unemployment low. But Federal Reserve Chairman Jerome Powell seemed to downplay that in his remarks on Wednesday, saying that the job market is “in solid condition. And our intention with our policy move today is to keep it there.”
Claiming credit? President Joe Biden (remember him?) is “is set to declare on Thursday that the economy has finally reached a turning point he has long sought,” reports The New York Times. It’s a turning point that may have arrived sooner if Biden’s policies hadn’t contributed to the recent period of inflation.
On the flip side, former President Donald Trump appears likely to cast the Fed’s move as a worrying sign of a wobbling recovery—or as part of a conspiracy against him, naturally. “To cut it by that much, assuming they’re not just playing politics, the economy would be very bad,” Trump said Wednesday, according to Reuters.
No cuts here. The House of Representatives voted Wednesday to block a bill that would avert a government shutdown when the fiscal year ends on September 30.
Like in every other year, Congress has to pass a new budget (or a continuing resolution) by the dawn of the new fiscal year on October 1. And just like happens in almost every year, lawmakers have failed to do that. The razor-thin Republican majority in the House means that Speaker of the House Mike Johnson (R–La.) has to keep his entire caucus in line—yes, it’s okay to laugh—or get bipartisan support for any spending bill.
In this case, he got neither. Democrats nearly unanimously opposed the continuing resolution that would have funded the government through March 28, and 14 Republicans voted “no” for good measure. The main objection to the bill had nothing to do with the federal budget and was mostly about language that would require proof of citizenship as part of voter registration processes in the states. However, existing federal laws already prohibit noncitizens from voting, and despite claims made by former President Donald Trump (and others), election data show
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