What the Fed is doing to the US election, the climate and the economy
Its refusal to lower interest rates is a mistake
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WHILE all eyes are on Donald Trump and Kamala Harris, one of the largest factors influencing the mood of American voters is playing out elsewhere. The Federal Reserve’s handling of inflation is souring the public on the US economy, harming vulnerable Americans, slowing the fight against climate change – and hindering the fight against inflation itself.
For the past several months, the Fed has resisted lowering interest rates in an environment that clearly demands lower rates.
Take its favoured inflation measure, the personal consumption expenditures (PCE) price index. The Fed repeatedly stated that it would not lower rates until it had confidence the PCE was headed back towards 2 per cent. Yet we are already there. While the annualised PCE stands at 2.5 per cent, the three-month annualised PCE is just 1.5 per cent.
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