Rate cuts could be a boon for Biden

Federal Reserve officials don't set interest rates with the presidential election in mind. In fact, the central bank is independent of the White House, and as Fed Chairman Jerome H. Powell has repeatedly said, the institution takes that independence seriously.

But the growing likelihood that the Fed could cut rates this year could provide support to President Biden during the election year. Investors generally don't expect any rate cuts to be announced when Fed officials conclude a two-day meeting on Wednesday. But they expect a rate cut in the near future, with more likely to come before November.

Rate cuts could also help improve housing affordability, an issue for young voters that has confounded the president. Falling interest rates could cause mortgage rates to fall. That could entice homebuyers, but it could also encourage more homeowners to put their homes on the market after years of holding on to the mortgages they took out when interest rates were much lower. An improving supply of available housing could help keep prices in check, some economists hope.

White House officials are careful not to comment on the Fed's interest rate decisions; Lael Brainard, a former Fed governor and head of Biden's National Economic Council, laughed off a reporter's question on the subject last week. But privately, some government economists are watching the Fed's moves, looking for any sign of further mortgage rate cuts.

The Fed may have already, and unintentionally, helped Biden's reelection prospects by keeping rates steady through the second half of 2023 as inflation cooled. Continued rate hikes could have closed the gaps in economic activity and increased the likelihood that the economy would enter a recession. This is one reason why progressive groups, and some Democratic senators, urged Fed officials last year to pause rate hikes.