COTW: FOMC Rate Decisions in Election Years

June 11, 2024COTW: FOMC Rate Decisions in Election Years

  • The Federal Reserve strives to maintain its independence from political influence, as this independence is crucial for its ability to implement monetary policy effectively and focus on its dual mandate of promoting maximum employment and price stability. However, while the Fed operates independently and aims to remain apolitical, its decisions (particularly interest rate decisions) inevitably intersect with the political landscape, influencing and being influenced by broader economic and political dynamics.
  • Between 1994 and 2023, the Fed has hiked interest rates during the months of May to November in an election year only 16% of the time. In contrast, the Fed has only cut rates 3% of the time during the same period of an election year since 1994.
  • In the seven months leading up to an election, the Fed has kept interest rates unchanged 81% of the time. The only other time that the Fed has cut rates in May or later in the year during an election year was in October 2008, during the Global Financial Crisis.
  • With markets expecting the first interest rate cut of the current hiking cycle in September, whether or not the Fed will deviate from average historical trends remains to be seen.


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