New old line of attack

 Trump seizes on Fed rate cut to open new line of attack on economy

Trump attributed the rate reduction to either a “very bad” economy or to the Fed’s “playing politics” to help Democrats.

By Victoria Guida

Federal Reserve Chair Jerome Powell spotlighted the strength of the economy this week as he lowered interest rates from punishingly high levels, saying the U.S. is in “good shape” and growth continues “at a solid pace.”

Donald Trump begs to differ.

The former president seized on the central bank’s half-a-percentage point rate cut — double the size of a standard move — to argue that “the economy is very bad.”

The Fed’s move to lower borrowing costs offers Trump a fresh line of attack against the Biden-Harris administration’s economic record — and a new chapter in his often contentious relationship with the Fed chief — that could resonate even as inflation fades.

“The decision by the Fed shows the economy and the job market are in very bad shape,” Brian Hughes, a senior adviser to the Trump campaign, said in a statement to POLITICO. “The Fed has started cutting rates this aggressively this close to a presidential election” because the U.S. is headed for a recession, he said.

The messaging on the economy is crucial because Americans regard it as among the top issues of the election. Trump still has an edge with the electorate: A NYT/Siena poll of likely voters released Thursday showed the GOP nominee up by 13 percentage points against Vice President Kamala Harris on the question of who would do a better job managing the economy.

But other surveys show that Harris has narrowed the gap — and even overtaken Trump in at least one. It’s an open question whether those sentiments can be budged this close to an election.

In an effort to help Harris’ argument, President Joe Biden took to the stage Thursday to advocate for the strength of the economy, pointing to strong GDP growth, cooling prices and low unemployment.

“I’m not here to say a job well done. I’m not here to say we don’t have a hell of a lot more work to do,” Biden said in a speech at the Economic Club of Washington D.C.

Powell’s decision to lower interest rates represents progress — not victory, Biden said. But he added that it’s “important for the country to recognize this progress because — if we don’t — the progress we made will remain locked in fear of the negative mindset that dominated our economic outlook since the pandemic began.”

The data backs up the idea that the economy is strong, though it is also true that the Fed reduced rates in part because the job market has been weakening, and officials are hoping to avoid a spike in layoffs.

“The labor market is actually in solid condition,” Powell told reporters Wednesday. “And our intention with our policy move today is to keep it there. You can say that about the whole economy. The U.S. economy is in good shape.”

Markets have been buoyant on hopes that the U.S. will avoid recession as the Fed begins its rate-cutting campaign, though central bank officials still think they have a way to go in lowering borrowing costs before they are no longer biting into growth.

Trump sharply criticized Powell when he was president and has resumed his attacks on the Fed chair, who he appointed. The former president has warned multiple times this year that the Fed would cut rates in an effort to help Democrats (though Powell has largely acted in line with market expectations based on economic data).

Now, he’s revising that argument.

“I guess it shows the economy is very bad, to cut it by that much,” Trump said during an appearance at a New York City Bitcoin bar, shortly after the decision was announced. “Assuming they’re not playing politics.”