Donald Trump will be furious with the Fed for handing Kamala Harris a win on the economy

Donald Trump won’t welcome the interest rates cut. Picture: Getty Images via AFP.

One of the few Americans who will be disappointed with the Federal Reserve’s decision to trim its official interest rate by half of a percentage, which will bring downward pressure on a whole raft of interest rates throughout the economy, will be Donald Trump.

Democrats will seize on the first official US interest rate cut since early 2020, when central banks around the world slashed rates to bolster their economies as Covid struck, as a sign of the Biden-Harris administration’s wise stewardship of the world’s largest economy.

The fight against inflation has been, or has almost, been won, and lower costs of living are on the horizon, so the claim will go.

While Kamala Harris is ahead of Donald Trump in most polls less than two months out from the presidential election, the former president consistently bests her on who would be the best manager of the economy. The Republican leader can’t afford arguments that suggest Harris or Biden have managed the economy well.

Trump was yet to speak about the decision on Wednesday afternoon (Thursday AEST), but his vice-presidential running mate JD Vance tried to spin the decision as best he could at a rally in Raleigh, North Carolina a few hours later.

“Half a point is nothing compared to what Americans have been dealing with for the last four years,” he said. “When Donald Trump left office, a lot of Americans were getting 3-4 per cent mortgages, now they’re getting 8 per cent mortgages, half a point is not going to help those families a whole lot.”

Federal Reserve chairman Jerome Powell speaks to reporters. Picture: Getty Images.

Most analysts were expecting the US central bank to start its rate cutting cycle with a hefty half a percentage point cut, which saw the official US interest rate fall to range of 4.75 to 5 per cent.

Republicans will accuse the Fed, with some justification, of acting in a political manner, when it could easily have chosen to wait until after the November poll to begin any more aggressive series of interest rate cuts. The perception has been created, warranted or not, that the central bank has helped Harris politically.

Setting interest rates is not remotely a science, which recent history has made starkly clear, so they could easily have waited.

Indeed, the rate cut will have more impact on US politics than it will on the US inflation rate. Official interest rates have much more impact on asset prices, houses and shares in particular, than they do on rates of inflation, which are affected by a whole host of factors often out of control of the central bank.

While Trump will not be privately furious, he might struggle to criticise the decision publicly: As president Trump was continually putting pressuring first on Federal Reserve chairwoman Janet Yellen, and then later the current chairman Jerome Powell, whom he appointed, to lower interest rates. As a real estate developer for much of his life Trump is well aware of the commercial benefits of lower interest rates.

There was some good news for Republicans in the Fed announcement. Powell in a subsequent press conference pointed out that the Biden administration’s immigration policy had increased the unemployment rate.

“There’s been quite an influx across the borders, and that is actually one of the things that’s allowed the unemployment rate to rise,” he said. That’s a handy policy argument, but not so effective as the benefit Democrats now enjoy from suddenly lower rates.