The Morning: An interest rate cut

Plus, the Hezbollah pager attack, wildfires and Icelandic wool

View in browser|nytimes.com September 18, 2024 SUPPORTED BY MASS GENERAL BRIGHAM Good morning. Today, my colleague Jeanna Smialek explains the politics of today's Fed announcement. We're also covering the Hezbollah pager attack, wildfires and Icelandic wool. —David Leonhardt The Fed building in Washington. Haiyun Jiang/The New York Times Eyes on the money By Jeanna Smialek I cover the Fed. The Federal Reserve is independent from politics. That doesn't mean that politics is independent of the Federal Reserve. Today, America's central bank will almost certainly cut borrowing costs from a two-decade high. More cuts are likely before the end of the year. The reason is economic: Inflation has come down from its 2022 peak, and unemployment has climbed. The Fed doesn't need to squeeze the economy as tightly as it did to bring prices under control. Also, keeping rates too high for too long could seriously hurt the job market. But cutting borrowing costs right now — just weeks before the election — pushes Fed officials into the middle of a political battle they would prefer to avoid. Donald Trump, the Republican candidate, says a rate cut before the election would be a bid to help Democrats. And while President Biden and Vice President Kamala Harris have both mostly avoided talking about the Fed, other prominent Democrats have called for lower borrowing costs; it would help the economy on their watch. Central bankers say they ignore the political calendar when they weigh their decisions. They have the freedom to do that: Because Fed officials do not answer to the White House, they have the independence to make decisions — even politically unpopular ones — based solely on inflation and employment. But that won't stop politicians from turning the Fed into a talking point. In today's newsletter, I'll explain why. Election booster Independence is important to the Fed. Back in the 1970s, it seemed to bend to pressure from the Nixon White House as it kept interest rates too low for too long. That mistake helped to drive runaway inflation, and it has haunted central bankers ever since. Today, Fed officials believe they should ignore the political cycle and focus on the economic fundamentals. Those fundamentals suggest it's now time to cut interest rates. Outside economists agree; some even think that officials have waited too long. But lowering borrowing costs this close to an election inevitably injects the Fed into the campaign. That's because rate cuts tend to help the party in power. Lower interest rates boost the economy by making it cheaper for people to borrow money to buy a house or start a business. And while the full benefits take time, cutting borrowing costs can shift America's economic vibe quickly. Cutting rates sends a clear signal: America is beating inflation. Given how much Americans hate inflation — in polls, they say it is a top concern this November — that's welcome news for the U.S. consumer. Already, mortgage rates are coming down, and expectations for lower rates have helped to lift stocks. All of that explains why voters and the politicians who court them prefer low rates. Many presidents — including Harry Truman, Nixon, Lyndon Johnson and Trump — pushed for lower rates. And some incumbents, including George H.W. Bush, blamed high interest rates for costing them re-election. Nonpartisan, but not perfect Fed officials realize that rates affect politics, but they face a dilemma. If they cut rates as expected, Republicans can accuse them of helping Democrats. But if they hold off until after the election, Democrats can accuse them of the reverse. Officials think that their best option is to pay no attention to the political calendar. "I can't say it enough: We just don't go down that road," Jerome Powell, the Fed chair, said earlier this year. But setting policy based on data doesn't guarantee that the Fed will make the right policy choices. After all, guiding the economy is more of an art than a science. How much should the Fed adjust rates to protect the economy? It is not always clear, and officials simply make their best guesses. This time, the Fed could make one of two big mistakes. It could cut interest rates too abruptly, which would speed up the economy and keep inflation high. Given that risk, some economists think that officials will cut interest rates by a cautious quarter-point today. That's like taking a foot off the brake, but just a little. The other risk is lowering rates too slowly and tanking the job market. Already, some economists point to a slowdown in hiring and a pickup in the unemployment rate as signs that the Fed might be falling behind. A larger-than-usual half-point rate cut this afternoon could cushion the job market against further slowdown. It's difficult to know today which path will look best in hindsight. But whatever the Fed chooses, one thing is certain: Politicians will be watching. Related: See what rate cuts mean for everyday finances — car loans, credit cards, mortgages, savings and student loans. A MESSAGE FROM MASS GENERAL BRIGHAM A Healthcare System Driven by Innovation At Mass General Brigham in Boston, scientists and clinicians collaborate to provide patients with highly personalized care for all forms of cancer and other diseases. By creating multidisciplinary clinical teams specializing in early detection and treatments including cellular and immunotherapies, doctors at Mass General Brigham bring their research directly from the bench to the bedside. LEARN MORE THE LATEST NEWS Pager Attack In Beirut, Lebanon. Wael Hamzeh/EPA, via Shutterstock Hundreds of pagers belonging to members of Hezbollah, the Iran-backed militant group, exploded at the same time across Lebanon and in Syria. See a video. The blasts killed 11 people and injured more than 2,700, Lebanese officials said. Israel appeared to be behind the attack: Its operatives hid explosive material in a shipment of pagers before they arrived in Lebanon, American and other officials said, with a switch to detonate them remotely. The pagers received a message at 3:30 p.m. that appeared to be from Hezbollah's leadership, officials said. Instead, it was a trigger — the pagers beeped for several seconds, then exploded. At least eight of those killed were Hezbollah fighters, the group said. Lebanese officials said an 8-year-old girl was killed, and Iran's ambassador to Lebanon was injured. Many victims had injuries to their faces, particularly the eyes. Video from a hospital in Beirut showed patients with mangled hands and burn injuries. The exploding pagers carried a Taiwanese brand name. But that company, Gold Apollo, said another firm in Hungary made the model involved. Hezbollah began to rely on pagers last year, out of fear that Israel had penetrated its cellphone network. Harris Interview Kamala Harris with members of the National Association of Black Journalists. Kenny Holston/The New York Times In an interview with Black journalists, Harris condemned Trump's false claim that Haitian immigrants in Ohio were eating pets, calling such rhetoric hateful and "a crying shame." Harris dodged when asked if she supported Roe v. Wade's restrictions on abortion after the second trimester, saying only that she supported restoring "the protections" of Roe. Asked about Black men who support Trump, Harris said she was "working to earn the vote — not assuming I'm going to have it because I am Black." More on the 2024 Election At a town hall with supporters, Trump suggested his tariffs would bring "so many auto plants" to Michigan. At one point he confused Bagram Air Base, in Afghanistan, with the Arctic National Wildlife Refuge in Alaska. Trump suggested he would restore a state and local tax break that largely benefits residents of blue states — despite signing a law in 2017 that limited it. Former governors — seven Republicans, 12 Democrats — urged sitting governors to certify the results after the 2024 vote, calling doing so "not open for debate." Trump's allies have argued that local officials can choose not to certify results. Groups backing Harris have reserved $332 million in ads for the campaign's final weeks, compared with $194 million from groups backing Trump. An Ohio woman regrets sharing a rumor that a Haitian neighbor might have taken another neighbor's cat. Right-wing campaigners spread her Facebook post. Trump Gunman Trump gave his Secret Service detail short notice that he would be golfing on Sunday, leading agents to forgo a scan of the perimeter. The acting Secret Service director told Trump that agents need to strengthen security at his courses if he wants to keep playing there. Several people who encountered Ryan Routh, the suspected gunman, in pro-Ukraine groups warned the U.S. about his erratic behavior, The Wall Street Journal reported. Harris condemned the apparent assassination attempt, and said she had called Trump to "see if he was OK." Trump described it as "a very nice call." Florida will conduct its own investigation, Gov. Ron DeSantis said, suggesting that he didn't trust the Justice Department. More on Politics Senator Chuck Schumer, the majority leader, with other Senate Democrats. Tom Brenner for The New York Times Senate Republicans blocked a bill that would have created a national right to I.V.F. access. Democrats planned the vote to highlight Republican opposition to reproductive rights. Senator Tammy Duckworth, an Illinois Democrat who used I.V.F. to have children after combat injuries left her with fertility problems, proposed the legislation. International In the Brasília National Forest this month. Ueslei Marcelino/Reuters Large parts of Brazil are on fire: In August, wildfires burned an area the size of Costa Rica. Roughly a million Ukrainians and Russians have been killed or wounded in the war between the two countries, The Journal reports. In Canada, Prime Minister Justin Trudeau's party lost a parliamentary seat in Montreal that it had held for decades. Many Canadians viewed the special election as a referendum on Trudeau. Years after a coup, the military in Myanmar has killed thousands of civilians, according to the U.N. Business Instagram will add stricter settings for teenagers. Users under 18 will be made private by default, and the app will not send them notifications at night. Read a guide to the rules. The Biden administration pushed its decision on whether to let a Japanese company buy U.S. Steel until after the 2024 election. (We recommend this episode of "The Daily" on the subject.) Other Big Stories Extreme heat and the wildfires it stokes are taking a physical toll on firefighters. They're exposed to heat stroke and exhaustion — and the possibility of health risks in the long term. Adults under 50 have been developing breast and colorectal cancers at higher rates in recent decades. Alcohol may be a factor, a report suggests. Opinions A survey of Gen Z shows that many young people have deep regrets about social media, Jonathan Haidt and Will Johnson write. Senator Tina Smith and Representative Alexandria Ocasio-Cortez introduce their new bill, which aims to build millions of affordable homes across America. On "The Opinions" podcast, Paul Krugman shares his advice for the Fed: Cut rates sharply. Here are columns by Thomas Friedman on foreign policy and the election and Michelle Goldberg on the deadly effects of abortion bans. Readers of The Morning: Don't miss out on a full year of savings. From in-depth coverage of Decision 2024 to unlimited news and analysis, Games, Cooking, The Athletic and more, subscribe now for only $1 a week for your first year. MORNING READS In Selfoss, in the south of Iceland.  Sigga Ella for The New York Times Following a thread: For a new way to see Iceland, bring your knitting needles. Health: Many pills, including one from Kourtney Kardashian, claim to work just like Ozempic. Experts say there's little evidence that they do. Pregnancy brain: As hormones surge, some brain areas shrink. Scientists say it may be a fine-tuning that helps mothers bond with and care for their babies. Lives Lived: Cathy Merrick fought for Indigenous rights in Canada. Her recent advocacy work included speaking on behalf of Indigenous victims' families in a series of murders by a white man. Merrick died at 63. SPORTS College football: Tennessee is adding a 10 percent "talent fee" to its season ticket prices next year to cover revenue-sharing costs, a first among major programs. M.L.B.: Shohei Ohtani hit a 48th home run, putting him two homers and two steals from the league's first 50-50 season. N.F.L.: The Miami Dolphins placed their quarterback Tua Tagovailoa on injured reserve after he was diagnosed with his third concussion in three years. He'll sit out at least four games. A MESSAGE FROM MASS GENERAL BRIGHAM A Healthcare System Driven by Innovation At Mass General Brigham in Boston, scientists and clinicians collaborate to provide patients with highly personalized care for all forms of cancer and other diseases. By creating multidisciplinary clinical teams specializing in early detection and treatments including cellular and immunotherapies, doctors at Mass General Brigham bring their research directly from the bench to the bedside. LEARN MORE ARTS AND IDEAS Noah Verrier's Uncrustables sandwich.  Noah Verrier Noah Verrier, a 44-year-old artist from Tallahassee, Fla., has created a niche for himself on social media: moody oil paintings of junk food. Verrier has rendered greasy cheesesteaks, a Taco Bell meal, extra-large sodas and dinosaur-shaped chicken nuggets. The endeavor has been lucrative. This past week one of his paintings — of a Smucker's Uncrustables sandwich — sold for just under $5,000. More on culture Sean "Diddy" Combs was denied bail after pleading not guilty to charges of sex trafficking, racketeering conspiracy and transportation to engage in prostitution. "Will you people stop trying to assassinate Donald Trump? Not only is it morally wrong, but you're also just giving him more things to brag about," Ronny Chieng said on "The Daily Show." THE MORNING RECOMMENDS … Christopher Simpson for The New York Times. Food Stylist: Simon Andrews. Toss cauliflower florets in spices for this vegetarian take on shawarma. Conceal under-eye circles more effectively. Clean your mirrors and windows better. Play an easy-to-learn board game. GAMES Here is today's Spelling Bee. Yesterday's pangrams were backboard, backdoor and corkboard. And here are today's Mini Crossword, Wordle, Sudoku, Connections and Strands. Thanks for spending part of your morning with The Times. See you tomorrow. Sign up here to get this newsletter in your inbox. Reach our team at themorning@nytimes.com. Editor: David Leonhardt Deputy Editor: Adam B. Kushner News Editor: Tom Wright-Piersanti Associate Editor: Lauren Jackson News Staff: Desiree Ibekwe, Sean Kawasaki-Culligan, Brent Lewis, German Lopez, Ian Prasad Philbrick, Ashley Wu News Assistant: Lyna Bentahar Saturday Writer: Melissa Kirsch Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for the Morning newsletter from The New York Times, or as part of your New York Times account. To stop receiving The Morning, unsubscribe. To opt out of other promotional emails from The Times, including those regarding The Athletic, manage your email settings. To opt out of updates and offers sent from The Athletic, submit a request. Subscribe to The TimesGet The New York Times app Connect with us on: Change Your EmailPrivacy PolicyContact UsCalifornia Notices The New York Times Company. 620 Eighth Avenue New York, NY 10018