Nearly three quarters of people may think that the Fed’s recent decision to cut interest rates was politically motivated, a recent survey shows.
In September, the Federal Reserve lowered interest rates – the first time in four years it had done so – cutting them by 50 basis points. Even as that followed cooling inflation and targets that justified the Fed’s move, the change’s proximity to the election apparently gave reason for investors across party lines to see other factors at work.
Regardless of whether that motive is real or imagined, there could be consequences as people head to the polls, the survey hinted. A full 60 percent of the 226 people surveyed last week by WalletHub said that interest rates will affect how they vote in the presidential election on Nov. 5.
And though it would happen just after election day, the Fed is expected to cut rates again on Nov. 7 by another 25 bps, a drop that would translate to $1.87 billion saved on interest over the following year, according to WalletHub.
According to the survey, over half – 54 percent of people – said that the rate cut in September has saved them money. Even with inflation coming down to historically normal levels, the high rates of inflation over the past few years have had a significant impact on finances. Over 90 percent of people said that inflation remains an issue for them, with about three-quarters saying they are more worried about it than a recession.
Political fears ahead of the election though, are pronounced, with 47 percent of people in US households citing a high (9 points on a scale of 10) concern about it, separate data from a forthcoming report by consumer research firm Hearts & Wallets show. By comparison, 44 percent of people said they had the same high level of concern about inflation, that firm found.
Meanwhile, 68 percent said that cutting interest rates will exacerbate inflation, according to the WalletHub survey.
“The vast majority of people I talk with do not feel a relief with their spending,” said Jim Crider, CEO of Intentional Living FP, in an email. “While the rate of inflation has slowed over the last few years, this does not change the fact that the overall cost of living has risen drastically. For most people, inflation over the last few years far outpaced their income increases.”
Rises in income are now similar to the inflation rate, but people are starting from a deficit because of years of high inflation, Crider said.
He advises clients to allocate some of their assets to bitcoin, he noted.
“All said, disinflation is not the same as deflation, and to pretend otherwise is gaslighting 99 percent of the population who are feeling the resounding impact of a broken money in their pocketbook week after week,” he said. “We address this issue by discussing, at a base level, what is money and why the money system is broken. Because of the broken money system, we have clients allocate to bitcoin.”
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