Fed Chairman Jerome Powell at a press conference on September 18 - Photo: REUTERS
According to the statement on September 18, the Fed decided to reduce the overnight lending rate by 50 basis points (0.5 percentage points), keeping this index in the range of 4.75 - 5%. This easing policy will continue on schedule to bring this interest rate to the range of 3 - 3.5% by the end of 2026.
Fed Chairman Jerome Powell
Safe landing?
This is the first interest rate cut by the US Federal Reserve (Fed) in more than four years. Since the early days of the COVID-19 pandemic (2019), the US Central Bank has raised interest rates to curb inflation, with the goal of seeking a "soft landing".
This concept is used by economic analysts to describe lowering inflation without pushing the economy into recession. Specifically, the Fed's mission is to bring inflation down to around 2% while keeping unemployment low.
The Fed's move brightens the prospects for a soft landing. The decision comes as inflation in the US has shown signs of improvement, but the big problem is the worrying unemployment situation.
Indeed, last month, Fed Chairman Jerome Powell referred to the labor market when he said the Fed's "mission" was to steer the US economy out of an inflationary shock. "We will do everything we can to support a strong labor market as we make further progress toward price stability," he said.
Economists have mixed views on the Fed’s move. For some, it’s good news for President Joe Biden, who has struggled with record inflation in the United States in recent years. For others, the rate cut also shows that the US economy needs a boost after being held back for so long. Most see the US economy not in recession, but still facing many difficulties.
Interest rates and elections
The Fed's attempt to keep interest rates high and cut them sharply now raises many questions about the impact of this decision on the 2024 US presidential election.
That’s good news for the Democratic Party of President Biden and his nominee Kamala Harris, who will be credited with keeping inflation in check. Lower interest rates, which make it more expensive to invest or spend, are also a positive signal to voters just months before the polls.
On the contrary, the US media immediately "hedge" against the possibility that the Republican Party will accuse the Fed's decision of being politically motivated, specifically "helping" the Democratic Party right before the election.
However, most US newspapers said that this was a purely economic decision, with no evidence of political involvement. The Conversation argued that in a highly diversified economy, a rate cut may make one group happy but there are other investors, for example those in the currency market, who will not see this as a good thing.
Moreover, it stands to reason that both Ms. Harris and her opponent, Donald Trump, will use this move to their advantage. If Democrats are willing to take any credit for getting inflation back on track, Republicans can also point to the Fed’s rate cuts as a sign of the US economy’s desperation under Mr. Biden, a consequence of the policies of the Biden-Harris administration.
CNN, meanwhile, asserted that the Fed's rate cuts have no impact on the election. Jason Furman, former chief economist under President Barack Obama (Democrat), analyzed that it would take until 2025 for these cuts to create changes in economic behavior.
"This has almost no impact on the economy before Election Day. The market is already like that and it's a long way from impacting things like unemployment, GDP or inflation," he told CNN.
In the past, Republican President George HW Bush witnessed economic growth of 5.8% in the three months immediately after the election. However, the unemployment rate increased sharply to 7.8% in June 1992. That was when the Democratic Party of Mr. Bill Clinton used the famous slogan "It's the economy, stupid" to persuade voters to "overthrow" Mr. Bush and elect Mr. Clinton.
Trump Organization seeks investment opportunities in Hung Yen
Speaking with Tuoi Tre on September 19, Mr. Nguyen Hung Nam - Vice Chairman of the People's Committee of Hung Yen province - confirmed that the Trump Organization (USA), owned by former US President Donald Trump, had come to work with the leaders of Hung Yen province and expressed his desire to cooperate and invest in this province in the fields of hotel construction, golf courses and entertainment complexes.
However, everything is still at the stage of exploring investment cooperation opportunities and the Trump Organization has not yet proposed the specific capital and investment location in the province.
On September 16, representatives of the Trump Organization had a meeting with the Provincial Party Secretary and Chairman of the People's Committee of Hung Yen province at the proposal of the Hung Yen Investment and Development Group Joint Stock Company. At the meeting, Mr. Tran Quoc Van - Chairman of the People's Committee of Hung Yen province - hoped that the Trump Organization would study investment plans in the province in the near future.
Speaking at the meeting, Mr. Nguyen Huu Nghia - Secretary of Hung Yen Provincial Party Committee - said that the province will create favorable conditions within the legal framework for Trump Organization to come to learn and promote investment cooperation. The province will assign relevant departments and branches to closely coordinate with central agencies to support the group to promote investment in Hung Yen province with the highest efficiency.
Source: https://tuoitre.vn/cat-giam-lai-suat-dong-thai-gay-tranh-cai-cua-fed-20240919214256664.htm
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