Just weeks before the U.S. presidential election, our nation will receive an update on the Federal Reserve’s plans for interest rates during their next meeting in mid-September.
On Aug. 30, the Department of Commerce released data from the Personal Consumption Expenditures (PCE) Price Index, revealing indicators of recent consumer spending and inflation. The PCE price Index rose 0.2 percent in July and 2.5 percent from July of last year.
Increases in various key economic indicators, like real gross domestic product (GDP), reported by the department have increased optimism leading up to the Federal Reserve’s meeting.
Sean Jackson, a junior business management major, said that he’s felt the impact of inflation on his expenses the past year.
“I definitely feel like I’ve been spending more over the past year,” he said. “It seems like everything, from essentials to education, has become more expensive, making it harder to manage my finances than in the past.”
In his latest speech at the Jackson Hole Economic Symposium, Chair Jerome Powell said job growth has slowed down.
“The cooling in labor market conditions is unmistakable. Job gains remain solid but have slowed this year,” Powell said.
This slowdown in job growth, while significant, adds another layer of complexity to inflation rates and the economic landscape.
Although inflation has decreased to 2.8 percent as of July 31, down from 8.5 percent in July of 2022, it’s important to consider external factors that could hinder efforts to fight inflation.
As election season approaches, it will be essential to monitor the economy before and during the administration change in the White House. Presidential candidate Vice President Kamala Harris proposed her plan of an “opportunity economy,” where her administration will attempt to implement various policies aimed at protecting middle- and lower-class Americans.
“I believe that if Vice President Harris wins the election, it could positively impact the economy and our daily lives,” Jackson said. “She has focused on lowering costs for middle-class families by tackling issues like hidden fees, high prescription drug prices, and rent increases.”
Dr. Alexander Henke, an associate professor of economics at Howard University, said that Harris’ plan to support the independence of the Fed is good.
“One big difference between [Trump and Harris] is that Harris supports the independence of the Fed, which I view as crucial to good long-term macroeconomic management,” Henke said. “In either case, it looks like Jerome Powell’s going to cut rates in the interim.”
Henke said an alternative outcome could arise if the Trump administration returns.
“Let’s suppose that Donald Trump wins, gets the trifecta and puts in his 20 percent tariffs. That would be very bad for growth,” he said. “But if it’s some sort of divided government, then neither of them can do that much.”
Historically, rising geopolitical tensions and conflicts have caused inflation to increase. Some current examples of geopolitical tension internationally are the ongoing conflict between Ukraine and Russia, unrest in the Middle East, and Chinese military drills near Taiwan. These issues can worsen economic challenges.
These conflicts have led to significant disruptions in global supply chains, particularly in key sectors like energy and agriculture, compounding economic challenges worldwide.
“[It] does constrain supply and we’ve seen this already with places like Ukraine, a big grain and other natural resource exporter, and limiting that is difficult,” Henke said. “Having to impose sanctions on a big energy exporter like Russia can create difficulties, especially in the eurozone. There have been supply disruptions that relate to Israel-Palestine as well.”
The results of the upcoming election will determine how the U.S. will respond to these international issues and their impact on domestic economic conditions.
Copy edited by Anijah Franklin
