Federal Reserve Set To Cut Interest Rates, Potentially Boosting Economy Before Election

But the Fed faces a big decision about how much to cut in its quest to achieve a “soft landing” after years of inflation.

WASHINGTON ― The Federal Reserve is set to cut interest rates Wednesday, revving up the economy in the pivotal months ahead of the Nov. 5 presidential election.

Whether the Fed will cut rates is not in doubt. But the size of the rate cut, the first since March 2020, is up in the air, amid broader uncertainty about the strength of the labor market and the Fed’s own willingness to juice the economy. A larger rate cut could draw the ire of former President Donald Trump, who has repeatedly threatened the Fed’s independence.

“They usually try to avoid making changes very close to an election, but sometimes the riskiest thing to do is nothing,” said Erica Groshen, a senior economics advisor at Cornell University and a former vice president in the research and statistics group of the Federal Reserve Bank of New York.

“The fact that they’re willing to move suggests that they’re seeing very clear signals that they don’t want to ignore,” Groshen told HuffPost, “and the biggest risk comes not from actually making those changes, but from political actors who would want to launch attacks on them that are baseless.”

Progressives, however, argue the risk of a recession is too great to let Trump’s threats get in the way. Sen. Elizabeth Warren (D-Mass.), a frequent critic of Federal Reserve Board Chair Jerome Powell, said the Fed should cut rates aggressively.