> "drastically cut rates right before the election to protect the incumbent".
They're not immune to political pressure. They really should be raising rates again (housing prices going up, stock market at all time highs, inflation still not under control) and aren't for exactly that reason.
I would assume the Fed thinks it's not actually an ideal time to raise rates.
Real growth is in the dirt, they have a dual mandate, and the funds rate is an indiscriminate weapon. Given the circumstances the ideal intervention would be fiscal policy aimed at reducing the supply of money in less CoL-sensitive areas but the people in charge of _that_ are uh, somewhat more susceptible to political pressure.
OP said insulated which shouldn't be conflated with immunity.
That said they operate with very little political interference in recent years which is part of why the greenback has such strength. If that were to change the USD/Economy would be in a world of pain. All of a sudden those deficits would be much more crippling as people wouldn't trust the currency.
The shit that would be heaved on both the equity and bond markets if the Fed hiked rates at this point is quite possibly Biblical. I'm not disputing that the pain is better now than later - and it may be the case here as well (I don't know, I'm a trader not an economist). My view is that rate hikes aren't really warranted at this point. Inflation is still high but many of the core measures are finally starting to show signs of improvement. The question at this point is whether the Fed can justify cutting this year or only in '25.
The other side of the coin is that if the Fed hiked now, half the country would be up in arms that the Fed basically assassinated the Biden administration. I think the Fed is not in the wrong of waiting a bit, at least until after the elections. Then if inflation starts coming off, well there's nothing for them to do, and if it doesn't, they can do it without so much fuss from politicians.
Hell, if Trump wins, he might be in the lucky position of claiming that he singlehandedly fixed everything and allowed the Fed to start cutting rates :D
They're not immune to political pressure. They really should be raising rates again (housing prices going up, stock market at all time highs, inflation still not under control) and aren't for exactly that reason.