Presidential election or not, the Fed will cut interest rates in the fall if it must, economists say

This should have been the week the Federal Reserve finally begins to cut interest rates after rapidly raising them to a 23-year high, at least according to Wall Street’s hopes from just two months ago. But disappointing inflation readings gave investors a rude awakening, and if economic data continue to show more of the same, then the Fed could very well delay the first rate cut into the fall — even if there’s a presidential election right around the corner.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link. This should have been the week the Federal Reserve finally begins to cut interest rates after rapidly raising them to a 23-year high, at least according to Wall Street’s hopes from just two months ago. But disappointing inflation readings gave investors a rude awakening, and if economic data continue to show more of the same, then the Fed could very well delay the first rate cut into the fall — even if there’s a US presidential election right around the corner. For now, traders are betting that the first rate cut will likely come in June, according to futures; to a lesser degree, some traders are betting on July. Fed officials have said they will begin to cut rates whenever they have “gained enough confidence” that inflation is under control. The central bank could also cut if the economy suddenly weakens, pushing up unemployment sharply, and officials have also said they won’t wait until annual price increases fall all the way to the Fed’s 2% target. But for now, stubborn price pressures in housing and services are keeping the Fed in wait-and-see mode.