NEW YORK – As the United States gears up for the 2024 elections, Ray Fair’s economic model suggests that the current stability of the economy could favor Democrats, but persistent inflation may bolster Republican chances. Wall Street has recently shown signs of optimism, following a decrease in both the Consumer Price Index and core inflation rates for October.
According to Fair’s model, if the Federal Reserve were to cut interest rates early, it could spur economic growth before the election, potentially aiding incumbents. However, he warns that significant deflation is needed to offset the electoral impact of high inflation, a situation often linked with recessions.
Economists are increasingly considering the possibility of a “soft landing,” where inflation falls without leading to a recession. The Federal Reserve faces the challenge of timing its policies to achieve this delicate balance as the election approaches. Historical patterns indicate that presidents have sometimes sought to sway Fed decisions to gain electoral leverage. In contrast, current Fed Chairman Jerome Powell has expressed admiration for Paul Volcker’s firm stance against such political pressures.
The Federal Reserve is currently navigating a complex scenario: maintaining high-interest rates to control consumer borrowing and combat inflation while avoiding any premature rate reductions that could undermine the credibility of its anti-inflationary efforts. The central bank’s decisions in the coming months will be critical in shaping the economic landscape ahead of the 2024 elections.
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