As she enters the home stretch of her campaign for the presidency, Kamala Harris is still dogged by two issues on which she’s seen to be weak: immigration and the economy.

Spreading the rumour of immigrants eating domestic pets was a clumsy attempt by Republicans at getting immigration back on the agenda. It has so far not worked in their favour. That leaves the economy, on which voters still narrowly favour Trump over Harris, blaming her administration for the soaring inflation of the last couple of years. On Wednesday, when the Federal Reserve cut interest rates by half a percent and signalled that the economy was in a good place, this no doubt hurt the GOP too.

Needless to say, the timing is unfortunate for Trump. It’s always possible that the prospects of a second Trump administration, whose inflationary policy proposals would make life difficult for the US central bank, weighed on the minds of Fed governors as they made their decision. Perhaps that is why the former president yesterday suggested the Fed’s decision was “political”. But a rate cut was imminent, and the timing of the move was not political.

It does, however, bolster Harris’s narrative — that she and Joe Biden inherited an economy in bad shape amid the Covid-19 pandemic, restored it to health, and can now look forward to better days. That, in short, was the message Fed chairman Jerome Powell delivered at his press conference immediately after the meeting that made the rate cut decision: that inflation has come down but the economy remains healthy.

There are two ways Trump can still try to spin this to his advantage — both of which he has tried, neither with much success. The first has been to say the Fed is working for Harris, an argument that resonates only with the most partisan backers who are already going to vote for him.

The second, potentially more effective line of attack has been to say that a half-point rate cut, which was deeper than many had been expecting, suggests the economy is in even worse shape than anyone thought. But both Powell’s favourable evaluation of the economy in his presser, and the strong rally in markets that followed the next day, made that claim look doubtful. For now, with investors in almost all asset classes growing richer by the hour and credit charges set to fall, Americans might be persuaded that better days are coming.

There are still risks for Harris in the Fed decision. In particular, if the Fed’s judgement about inflation turns out to be wrong and inflation turns back up, it could lead to a rocky autumn in the markets. But with less than seven weeks to go before the election, the odds that any panic would break out first are diminishing.

A sharp turn back up in interest rates — and an attendant fall in stock markets — would be a problem for a Harris presidency. But it might not be a problem for the Harris candidacy.

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John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).

jarapley

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