News Analysis
No, politics had nothing to do with the Fed’s decision to skip raising interest rates at a meeting that concluded on Sept. 21.
“We do not discuss politics at our meetings, and we do not take politics into account in our decisions. As I said, we’re generally pleased with the progress of the economy, and the decision not to raise rates today and to wait for some further evidence … is largely based on the judgment that we’re not seeing evidence that the economy is overheating,” Federal Reserve Chair Janet Yellen said at a press conference in Washington.
Republican presidential nominee Donald Trump had previously accused the Fed of defaulting on its promise to raise rates four times in 2016 for political reasons and in support of the current Obama administration and Democratic presidential candidate Hillary Clinton.
While the Fed’s constant flip-flopping and ultimate failure to deliver on a promise hurt its credibility, there were some good reasons not to hike rates in the beginning of the year (China, Brexit). At this point, a change in interest rates won’t have an impact on the real economy before the election, but it could avoid a market correction, which seems to be the Fed’s policy not just in election years.
