Biden makes ‘declaration of progress’ on economy after Fed cuts interest rates

Interest rates going down ‘will provide relief by making things more affordable’

Joe Biden is taking credit for steering the US economy through post-Covid stresses (EPA)

With the Federal Reserve trimming interest rates for the first time since before the Covid-19 pandemic and inflation rates slipping to pre-Covid levels, President Joe Biden is taking a moment to savor the victory with a speech to the Economic Club of Washington on Thursday.

Biden said the decision by the Fed to cut rates after years of post-pandemic inflation led them to raise them from the near-zero levels they were at during the worst days of Covid represented a “good day for the country” and “good news for consumers” because borrowing costs will come down.

“It’s good news, in my view, for the overall economy, because lower borrowing costs will support economic growth. And it’s important signal from the Federal Reserve to the nation that after repeated interest hikes to cool down inflation, inflation has come back down, and the Fed is to lowering rates to keep the … economy growing at its peak,” Biden said, citing the decline in inflation from a peak of 9.1 per cent to nearly 2 per cent today.

But Biden stressed that he was not there to brag about “a job well done,” but was instead there to discuss “how far we come, how we got here, and most importantly, the foundation that I believe, built for a more prosperous and equitable future in America.”

“The Fed lowering interest rates isn’t a declaration of victory. It’s a declaration of progress. It’s a signal we’ve entered a new phase of our economy and our recovery,” Biden continued, adding later that he believes it’s important for the country to recognize the progress that has been made rather than becoming “locked in the fear of negative mindset … instead of seeing the immense opportunities in front of us right now.”

“This is a moment, in my view, for business to feel greater confidence, to invest higher, to expand. It’s a moment for individuals to feel greater confidence, buying a home, a new car, starting a family, starting a new business,” he said.

“We’re creating jobs. Employment remains very low. Small business creation is at its historic highs. The economy is growing. The main challenge we’ve had, it’s been a painful one, but it’s been a pandemic, and the inflation it created causing enormous pain and hardship for families all across America … but now, now, inflation is coming down in the United States … it’s come down faster and lower than almost any other of the world’s advanced economies. So now, instead of looking at interest rates increases, interest rates are going to be coming down, and they’re expected to go down further, and that’s a good place for us to be.”

White House Chief of Staff Jeff Zients told reporters on a briefing call late Wednesday that Biden would be using the address to “speak to a new milestone” being reached, with interest rates and inflation dropping while wages and America’s GDP are simultaneously going up.

By any measure, those statistics represent a massive win for Biden and Vice President Kamala Harris, who is running to succeed him against the man he defeated four years ago, former president Donald Trump.

No other major economy has weathered the Covid-19 pandemic and post-pandemic inflation the way the United States has. Under Biden, there has been near-continuous job growth and economic expansion since he took office in January 2021, with the US avoiding the recessions that have hit other countries despite predictions of a recession from many economists.

But Zients said Biden’s speech is not meant as a “declaration of progress — significant progress,” rather than a “declaration of victory.”

“The President believes it’s important to mark this moment the country by laying out how far we’ve come, while also outlining work we still have to do,” he said.

The White House chief of staff recalled how Biden came into office with what he described as “a once-in-a-generation pandemic and an unprecedented shutdown in the economy” for which the outgoing administration had left “no plan or path forward.”

“In less than two months, [Biden] devised and ... negotiated the most significant recovery package in decades, the American Rescue Plan,” he said.

Zients added that Biden also “acted quickly to address global inflation” caused by broken supply chains and the invasion of Ukraine.

“President Biden took on the roots of the challenge he worked with the private sector untangles snarled supply chains, getting goods back on shelves again. The President coordinated with allies and partners to address food and energy prices as the result of Putin’s decision to invade Ukraine, including historic releases of oil reserves to stabilize global energy markets,” he said.

National Economic Council director Lael Brainard said with interest rates falling, the administration’s focus is now on “sustaining the important gains” that have been made on employment levels and household income.

She pointed out that the decline in inflation rates, combined with the Fed’s decision to cut interest rates, “will provide relief by making things more affordable.”

In addition, Brainard pointed out that gasoline prices are at their lowest levels in three years, and the cost of food and consumer goods are all down over the last year while wages are at a higher level than they were pre-pandemic.

“The President will note this hard-won progress, but emphasize continuing to work together to tackle long-standing affordability challenges for middle class families. America needs more housing. That’s why it’s critical to move forward on ambitious plans to bid to bring housing costs down by building millions of new affordable homes and providing incentives for states and localities to remove outdated obstacles to building,” she said.