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How elections test the Federal Reserve's independence

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Inflation is top of mind for voters heading into 2024's election. That could make the Federal Reserve subject to pressure from politicians. The Fed has held interest rates at restrictive levels as incumbent President Joe Biden touts his economic performance.

The anticipated November matchup between President Joe Biden and former President Donald Trump could come down to voters' views on the economy.

"Most of the fiscal stimulus occurred when President Trump was president. President Biden continued that with another round," said David Kelly, chief global strategist at J.P. Morgan. "Inflation works with a lag. And so this was built up all the way through the pandemic."Central banks including the Federal Reserve are tasked with setting interest rates to stabilize prices.

The reporting evoked memories of a volatile period in U.S. politics and economics. In the lead-up to the 1972 election, President Richard Nixon directed then-Fed Chairman Arthur Burns to issue stimulative interest rates, hoping it would help him secure his electoral victory. "This regionalism is really a nod to our federalist system of government itself," said Christina Parajon Skinner, an assistant professor of legal studies and business ethics at the University of Pennsylvania's Wharton School of Business.

 

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