So the Fed could favor Harris’ candidacy.

Rome, August 25, 2024 – There is a fundamental difference between B.C.E.European Central Bank, H Federal Reservethe central bank of the United States, in terms of defining their respective tasks. Both must keep inflation under control, but while the ECB’s statute stops there, the law regulating the Fed also gives it the task of keeping interest rates low to support investment and employment. It follows that, although both share With the aim of keeping prices within an annual increase of 2%.The Fed can balance this goal with its other mandates; it can decide that it needs to support employment even if prices remain above 2%, and so interest rates fall.

But the ECB can’t do that. The consequences are clear. Fed Chairman Powell said yesterday that there are signs of weakness in employment in the US and hinted that they are preparing to cut interest rates. Adding to this divergence between central banks is the fact that the US government is free to choose its budget deficit and therefore whether to support the economy with a higher deficit. There is European Commission Instead, it has a modest and necessarily balanced budget, except for exceptional decisions such as those taken during the pandemic, to launch the next generation of the EU, while member states are also obliged to keep their accounts in order.

This means that the United States can pursue an active economic policy, while Europe cannot. Perhaps it is time to start thinking carefully about these problems. Finally, there is Political aspect For the decision announced by Powell yesterday. The imminent interest rate cut will significantly reduce the strength of the main challenge facing Trump to the economy. Objectively, the chances of a Democratic victory in the November elections are enhanced.