LARRY KUDLOW: The Fed is playing politics

In mid-September 2024, the Federal Reserve made a significant decision to cut interest rates by 50 basis points, a move that has sparked debate about its political implications. This rate reduction occurred just over six weeks before the presidential election, raising suspicions that the Fed may be attempting to influence the electoral landscape. Economic indicators released around the same time revealed that inflation had risen to 2.4%, which is notably higher than the Fed's target of 2%. Core inflation figures were even more concerning, reported at 3.3%. The Fed's rationale for the rate cut was ostensibly linked to a weakening jobs market and the expectation that inflation would soon align with its target. However, the reality of the economic situation paints a different picture. Despite the Fed's claims, the labor market has shown resilience, and consumer spending remains robust, largely supported by government stimulus measures. Critics have pointed out that the timing of the rate cut is unprecedented during a presidential election cycle, suggesting that the Fed's actions may be politically motivated. Fed chair Jay Powell's public denials of any political influence have only fueled skepticism regarding the central bank's independence. As the economy faces challenges, particularly in sectors like manufacturing and housing, the Fed's decision to implement such a drastic rate cut raises questions about its commitment to maintaining economic stability versus engaging in political maneuvering.