In less than 90 days, we will elect the next President of the United States. Regardless of which camp you’re in, I think we can all agree that this is an important election. How the election will impact the financial services industry is going to be interesting. According to The Motley Fool, there are signs the Fed may cut rates again in 2024, although it has already changed its stance on rate cuts more than once.
What Happened to the prime rate in the 12 Presidential elections since 1972:
- 7 out of 12 times, the rate ended the year higher
- 4 out of 12 times, the rate ended the year lower
- 1 out of 12 times, the rate ended the year the same
The market doesn’t seem to care if the new President was a Democrat or a Republican. What matters more is the current state of the economy and how it might react to the new President. The Federal Reserve and financial institutions set our interest rates. It doesn’t matter who is in the Oval Office. That said, the President can indirectly influence fed rates. They can do this by nominating members. They can also remove the Fed Chair, enact policies and disagree with Federal Reserve decisions. The President can appoint the Federal Reserve Chair and nominate all seven members of the Board of Governors. Their choices will ultimately affect interest rates. Yet, each member serves a term of 14 years. A new one is appointed every two years. As a result, the current President’s influence is limited. Besides, the Senate has to confirm each nominee – further limiting the President’s power.
Rates are at historical highs. Inflation is no longer soaring. So, rates are unlikely to keep rising in 2024. The Federal Reserve is keeping rates high to stop runaway inflation but it’s no longer signaling more hikes. It may be a good time to lock in rates by opening CD’s or refinancing your mortgage loan.
https://www.fool.com/the-ascent/personal-finance/how-elections-affect-interest-rates
Tami Coffey
