CNN
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The Federal Reserve cut interest rates for the first time in the Biden era on Wednesday after the White House spent the past three years grappling with Americans’ dissatisfaction with the cost of living, raising new questions about the health of the economy and the impact on voters at the ballot box.

The move is further gratification for President Joe Biden, whose pandemic-era agenda has resulted in trillions of dollars in government spending – which, combined with strong demand for goods, supply chain bottlenecks and Russia’s war with Ukraine, pushed inflation to its highest level in 40 years.

The half-percentage-point cut could indicate that the elusive “soft landing” – the term preferred by experts for raising borrowing costs to slow economic activity while avoiding severe unemployment – has been achieved. Biden, who has publicly praised the Fed’s policy independence, will speak at the Economic Club of Washington, D.C., on Thursday and is likely to tout an economy that has come full circle in four years.

But the rate cut could also be an indication that the economy, which is showing signs of stress, needs a boost. Although most mainstream economists agree that a recession is not imminent, they also believe that the economy is not out of the woods yet.

With less than 50 days to go until Election Day, another question arises: Will it matter to voters?

Nevada real estate agent Zoila Sanchez told CNN’s John King that lower interest rates would be a welcome relief for residents who are buying a home or planning to refinance.

“The prices are extremely high, higher than ever before,” Sanchez told King. “It’s not affordable for the average person.”

Homebuyers taking out a mortgage and homeowners refinancing their mortgages could see their monthly payments drop. In fact, that’s already happening — mortgages are based on bond yields, which have been falling in recent weeks in anticipation of a rate cut. Auto loans and credit card debt will also eventually become cheaper. And if the Fed makes a bigger rate cut, the stock market could rise even further from the record highs it hit this week — which would impact the retirement accounts of Americans with 401(k) plans and the portfolios of the smaller portion of Americans who own stocks.

However, most economists expect the impact to be muted or delayed, pointing to the moves the market already made when Powell announced in August that rate cuts were imminent. That’s when mortgage rates started falling. Financial markets hit record highs and are still near them.

According to Jason Furman, former chief economist under former President Barack Obama, it could take until 2025 for any interest rate cuts to lead to comprehensive changes in economic behavior.

“It’s unlikely to have any impact on any aspect of the economy before Election Day,” Furman told CNN. “It’s already priced into the market and it’s far too early to have any impact on things like unemployment, GDP or inflation.”

Data from the St. Louis Federal Reserve show that it takes at least nine months for higher interest rates to slow economic activity and lower prices in response. And it takes about 12 months for consumers to feel the impact of lower interest rates.

And some historical data suggests that voters decided their opinion on the economy months ago.

President George HW Bush enjoyed economic growth of 5.8% in the three months immediately before Election Day, but unemployment had reached a worrying high of 7.8% in June 1992. This concern – along with Democrat Bill Clinton’s slogan “It’s the economy, stupid” – led voters to turn their backs on Bush and elect Clinton.

Aaron Klein, an economist at the Brookings Institution, said some voters gave Vice President Kamala Harris a slight edge in the polls because of her handling of the economy, because they did not want to support either Biden or Trump’s policies.

“The most important measure of the incumbent vote share is how voters felt in April, May and June,” Klein told CNN. “Voters’ attitudes toward the Biden-Harris administration are already firmly established.”

Still, both sides have made it clear they believe lower rates could help consumers – and ultimately voters – who have long suffered from high costs.

Democratic Senators Elizabeth Warren, John Hickenlooper and Sheldon Whitehouse this week called for the Fed to cut interest rates even more, by three-quarters of a percentage point, to encourage more borrowing. And Biden, who has sought to emphasize the Fed’s independence from the executive branch, said in the spring that he believed a rate cut was justified.

Steve Moore, economic adviser to former President Donald Trump, said the economy deserves a quarter-percentage point cut but believes the Fed should have done so sooner.

“They waited three years to do this, why are they doing it on the eve of the election?”

Several members of Trump’s team believe the Fed is trying to use its influence in this election campaign to stimulate the economy under a Democratic administration so that voters can feel better about their finances when they go to the polls.

When Powell was asked in July whether the Fed could remain apolitical if it decided to cut interest rates in September, he explicitly answered in the affirmative.

“This is my fourth term at the Fed,” Powell said. “Everything we do before, during or after the election will be based on the data, the outlook and the assessment of risks.”

Trump said in a press conference in August that he believed the Fed was acting on “gut feeling” and that a president “should have some say” in how the Fed operates. He later backed away from that stance.

Moore told CNN that Trump does not necessarily want the Fed to be more closely tied to the White House, but he does want more transparency in the central bank’s decisions. In a second term, Trump could demand regular audits and real-time releases, rather than weeks-long delays in releasing minutes of closed-door meetings.

“C-SPAN cameras should be present at every meeting,” Moore said.

This article has been updated to reflect the Fed’s rate cut announcement.