June 16, 2024

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March's hot inflation report is a political blow to Biden

March's hot inflation report is a political blow to Biden

President Biden said Wednesday he still expects the Federal Reserve to cut interest rates this year despite accelerating price growth across the economy, though he said new data suggests the cut may be delayed until later in the year.

Biden said in a press conference with Japanese Prime Minister Kishida Fumio, after they met at the White House: “I am sticking to my expectations that before the end of the year, there will be a cut in interest rates.”

“It might delay this by a month or so — I'm not sure about that,” Mr. Biden said. “We don't know for sure what the Fed is going to do. But look, we have succeeded in bringing inflation down significantly.”

Mr. Biden's comments were a hint at what has historically been — with notable exceptions — a taboo topic for presidents: influencing Fed policy. Many of Biden's predecessors have refrained from even speculating on interest rate decisions, citing the Fed's independence. The president's immediate predecessor and now opponent of re-election, Donald J. Trump, broke with that history, by repeatedly and loudly criticizing the Fed while he was president and demanding that the central bank lower interest rates.

Mr. Biden’s aides frequently talk about the need for the central bank to remain independent. His comments, although more in the context of criticism than guidance, risked, if only slightly, blurring that line.

Biden was counting on cooling inflation — and subsequent interest rate cuts — to raise his reelection prospects.

The president and his aides have publicly touted a decline in annual inflation rates over the past year, after witnessing the fastest price growth in 40 years that depressed the president's approval ratings earlier in his term.

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They were eager for inflation to fall further, in order to provide relief to consumers and prompt the Fed to lower interest rates — a move that would help lower borrowing costs for mortgages, auto loans and other consumer credit. Mr. Biden has placed a particular focus on homebuyers, including young voters who are crucial to his electoral coalition, and who are struggling to afford high housing prices as mortgage rates remain at around 7 percent.

Wall Street analysts see Wednesday's surprise rise in inflation as a signal that the Federal Reserve may leave interest rates unchanged for months longer than expected. That could mean no cuts before the November election, a campaign in which Biden's Republican opponent, former President Donald J. Trump, criticized Biden for rapid price increases and high borrowing costs.

This news comes as opinion polls have begun to show a slow improvement in Americans' views of the economy in recent months. Democratic pollsters also point to the latest polls as a road map for how Biden will talk about inflation in the coming months: They suggest that American voters blame corporate greed, more than government spending, for rising prices. Mr. Biden has built on that message, including calling on businesses in his State of the Union address to keep prices high.

He struck a similar tone on Wednesday in a statement that emphasized consumers' frustration with inflation.

“Prices remain very high for housing and groceries, even as the prices of key household items, like milk and eggs, are lower than they were a year ago,” Biden said. “I have a plan to lower housing costs — by building and renovating more than 2 million homes — and I'm calling on businesses, including grocery retailers, to use record profits to lower prices.”

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