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Vance, Trump double down on presidential influence on Fed policy

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Republican presidential candidate former President Donald Trump speaks during a press conference at his Mar-a-Lago estate on August 08, 2024, in Palm Beach, Florida. 

Joe Raedle | Getty Images

When it comes raising and lowering interest rates, Republican presidential nominee Donald Trump says the president should “at least have a say.”

“They’ve gotten it wrong a lot,” Trump said of the Federal Reserve‘s decision-making during a news conference on Thursday at his Mar-a-Lago residence in Florida. 

“In my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman,’ Trump said.

Sen. JD Vance of Ohio, the Republican vice presidential nominee, echoed this opinion in a CNN interview that aired on Sunday, saying that interest rate policy “should fundamentally be a political decision.”

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Also over the weekend, Vice President Kamala Harris told reporters in Arizona that she “couldn’t… disagree more strongly” with Trump’s suggestion that the president should have a voice in the central bank’s monetary policy moves.

“The Fed is an independent entity, and as president, I would never interfere in the decisions that the Fed makes,” Harris said.

The president has no direct control over interest rates

As it stands, the president exerts no direct control over interest rates. The Federal Reserve sets interest rates, and it operates independently of the White House.

“While the Fed’s day-to-day operations are intentionally removed from partisan political input to protect the central bank’s integrity, the Fed and its conduct of monetary policy remain democratically accountable,” said Brett House, economics professor at Columbia Business School.

Through the Federal Reserve Act, the legislative and executive branches of the government set the mandate of the Fed to promote maximum employment, keep prices stable and ensure moderate long-term interest rates, House explained.

“If a president wants to change this mandate, they always have the option to marshal support in Congress for an amendment of the act or new legislation,” he added.

A rate cut is coming

Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels in more than 40 years. The Fed responded with a series of rate hikes to effectively pump the brakes on the economy in an effort to get inflation under control.

The federal funds rate, which sets overnight borrowing costs for banks but also influences consumer borrowing costs, is currently targeted in a range of 5.25% to 5.50%, the result of 11 rate increases between March 2022 and July 2023.

Now, recent economic data indicates that inflation is falling back toward the Fed’s 2% target, paving the way for the central bank to lower its benchmark rate for the first time in years. The personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of 2.5% year over year in June. 

Markets have fully priced in the likelihood of at least a quarter percentage point rate cut in September and a strong likelihood that the Fed will lower by a full percentage point by the end of the year.

Once the fed funds rate comes down, consumers may see their borrowing costs start to fall as well.

Trump has a contentious history with the Fed

Trump, who nominated Jerome Powell to head of the nation’s central bank in 2018, has been advocating for lower rates for years. The former president was a fierce critic of the Fed chief and his colleagues while he was in the Oval Office, skirting historical precedent by repeatedly and publicly berating the Fed’s decision-making

During that time, Trump complained that the central bank maintained a fed funds rate that was too high, making it harder for businesses and consumers to borrow and putting the U.S. at an economic disadvantage to countries with lower rates.

Ultimately, though, Trump’s comments had no impact on the Fed’s benchmark.

“Any chairman is going to remain loyal to the Fed’s mandate over any browbeating from the White House,” House said. 

Now, however, Trump has cautioned against the Fed lowering rates shortly before the presidential election in November.

Trump told Bloomberg Businessweek in an interview in July that cutting rates in September, just weeks ahead of the election is “something that [central bank officials] know they shouldn’t be doing.”

Earlier this year, the former president also told Fox Business that he would not reappoint Powell to lead the Fed.

“I think he’s political,” Trump said. “I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”

Fed Chair Powell: We are a non-political agency, don't want to be involved in politics in any way

When asked about these comments during a press conference after the FOMC meeting last month, Powell underscored the Fed’s singular focus on the economy.

“We don’t change anything in our approach to address other factors like the political calendar,” Powell said. “We never use our tools to support or oppose a political party, a politician or any political outcome.”

According to Greg McBride, chief financial analyst at Bankrate.com, “the Fed’s independence will remain paramount — regardless of who is president.”

A ‘consequential year’ for monetary policy

The central bank is an independent agency that governs decisions about monetary policy without interference from the president or any branch of government. Therefore, it is theoretically free from political pressure.

Still, the stakes are high in 2024.

In January, Fed Chair Powell said at a press conference that this was going to be “a highly consequential year for, for the Fed and for monetary policy.”

In the months that followed, signs of economic growth and cooling inflation laid the groundwork for a widely anticipated rate cut, which is welcome news for Americans struggling to keep up with sky-high interest charges.

After July’s Federal Open Market Committee meeting, Powell said that central bankers would cut rates as soon as September, if the economic data supports it.

How the Fed adjusts policy during election years

In previous presidential election years, the Fed has maintained its charted course through the election, whether that was tightening as in 2004, cutting in 2008 or remaining on hold as in 1996, 2012 and 2020, according to a research report by Wells Fargo released in February.

Further, since 1994, the Fed adjusted its policy rate roughly the same number of times in presidential election years as in non-election years, the report said.

A separate research note by Barclays also found “no compelling statistical evidence that Federal Reserve policy is conducted differently during presidential elections.”

The Fed probably should have cut rates this week, strategist says

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As the price of bitcoin falls, you can leverage this tax loophole

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Jaque Silva/ | Nurphoto | Getty Images

With the price of bitcoin down from a record high in January, there’s a chance for some investors to score a tax break, experts say.  

Following a post-election rally, the flagship digital currency touched $109,000 on inauguration day before falling in February. As of midday Friday, the price was around $84,000, after dipping below $80,000 overnight, according to Coin Metrics.

The latest selloff presents a tax planning opportunity, including a “loophole” that could go away amid Congressional tax negotiations, according to Andrew Gordon, a tax attorney, certified public accountant and president of Gordon Law Group.

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The strategy, known as “tax-loss harvesting,” allows you to offset profitable investments by selling declining assets in a brokerage or other taxable account. Once your losses exceed gains, you can subtract up to $3,000 per year from regular income and carry excess losses into future years. 

Some investors wait until December for tax-loss harvesting, which can be a mistake because asset volatility, particularly for digital currency, happens throughout the year, experts say. 

“You should look for these opportunities continually and take advantage of them as they occur,” Gordon said.  

You should look for these opportunities continually and take advantage of them as they occur.

Andrew Gordon

President of Gordon Law Group

The crypto wash sale ‘loophole’ 

When selling investments, there’s a wash sale rule, which blocks you from claiming a loss if you repurchase a “substantially identical” asset within a 30-day window before or after the sale.

But currently, the wash sale rule doesn’t apply to cryptocurrency, which can be beneficial for long-term digital currency investors, experts say.

“If you sell, for instance, bitcoin at a loss today and then buy it back tomorrow, you still have your loss on the books,” Gordon said. “This is an extremely effective strategy for crypto investors because they don’t have to exit their position.”

However, the strategy could disappear in the future as Congressional Republicans seek ways to fund President Donald Trump‘s tax agenda.

Sens. Cynthia Lummis, R-Wyo. and Kirsten Gillibrand, D-N.Y., in 2023 reintroduced a regulatory framework for cryptocurrency, which included closing the crypto wash sale loophole. Former President Joe Biden‘s fiscal year 2025 budget also included the proposal.

In the meantime, “the IRS gives us this loophole. We may as well take it,” Adam Markowitz, an enrolled agent at Luminary Tax Advisors in Windermere, Florida, previously told CNBC.

Of course, you should always consider your investing goals and timeline before implementing the tax strategy.

Tax Tip: Crypto Assets

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Americans are suffering from ‘sticker shock’ — here’s how to adjust

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A worker stocks eggs at a grocery store in Washington, D.C., on Feb. 12, 2025.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Whether it’s a dozen eggs or a new car, Americans are having a hard time adjusting to current prices.

Nearly all Americans report experiencing some form of “sticker shock,” regardless of income, according to a recent report by Wells Fargo.

In fact, 90% of adults said they are still surprised by the cost of some goods, such as a bottle of water, a tank of gas, dinner out or concert tickets, and said that the actual costs are between 55% and 200% higher than what they expected depending on the item.

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Many Americans are still cutting back on spending, making financial choices and delaying some life plans, the Wells Fargo report also found. The firm polled more than 3,600 consumers in the fall.

“The value of the dollar and what it is providing may not be as predictable anymore,” said Michael Liersch, head of advice and planning at Wells Fargo. As a result, “consumer behaviors are shifting.”

Still, adjusting to a new normal takes time, he added: “Habit formation does take a while. Next year what you can imagine seeing is consumers being a little less surprised or shocked by prices and adapting to the current situation to create that goals-based plan.”

Some change is already apparent. Although credit card debt recently notched a fresh high, the rate of growth slowed, which indicates that shoppers are starting to lean less on credit cards to make ends meet in a typical month, according to Charlie Wise, TransUnion’s senior vice president of global research and consulting.

“After years of very high inflation, they are kind of figuring it out,” Wise said. “They’ve adjusted their baseline for what things cost right now.”

But with President Donald Trump‘s proposed 25% tariffs on imports from Canada and Mexico set to take effect in March, there is also the possibility that prices will rise even further in the months ahead.

Consumers fear inflation will pick up

Mexico and Canada tariffs could put pressure on some consumer staples, experts say. That includes already high grocery prices, which are up 28% over the last five years, according to the Bureau of Labor Statistics.

The prospect of tariffs and renewed inflation is weighing heavily on many consumers

The Conference Board’s consumer confidence index sank in February, notching the largest monthly drop since August 2021. The University of Michigan’s consumer sentiment index similarly found that Americans largely fear that inflation will flare up again.

A recent CreditCards.com survey found that 23% of Americans expect to worsen or go into credit card debt this year, in part because they are making more purchases ahead of higher tariffs.

How to battle sticker shock

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There’s still time to lower your 2024 taxes or boost your refund

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Pra-chid | Istock | Getty Images

With tax season well underway, you may be eager for strategies to reduce your 2024 taxes or boost your refund. However, there are limited options, especially for so-called “W-2 employees” who earn wages, experts say.

After Dec. 31, there are “very few” tax moves left for the previous year, according to Boston-area certified financial planner and enrolled agent Catherine Valega, founder of Green Bee Advisory.

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Once the calendar year ends, it’s too late to claim a tax break by boosting 401(k) plan deferrals, donating to charity or tax-loss harvesting.

But there are a few opportunities left before the April 15 tax deadline, experts say. Here are three options for taxpayers to consider. 

1. Contribute to your health savings account

If you haven’t maxed out your health savings account for 2024, you have until April 15 to deposit money and score a tax break, experts say.

For 2024, the HSA contribution limit is $4,150 for individual coverage or $8,300 for family plans. However, you must have an eligible high-deductible health insurance plan to qualify for contributions.  

“The HSA is easy,” said CFP Thomas Scanlon at Raymond James in Manchester, Connecticut. “If you are eligible, fund it and take the deduction.” 

Tax Tip: IRA Deadline

2. Make a pre-tax IRA deposit

The April 15 deadline also applies to individual retirement account contributions for 2024. You can save up to $7,000, plus an extra $1,000 for investors age 50 and older.

You can claim a deduction for pre-tax IRA contributions, depending on your earnings and workplace retirement plan.

The strategy lowers your adjusted gross income for 2024, but the account is subject to regular income taxes and required withdrawals later, said CFP Andrew Herzog, associate wealth manager at The Watchman Group in Plano, Texas.

“A traditional IRA simply delays taxation,” he added.

A traditional IRA simply delays taxation.

Andrew Herzog

Associate wealth manager at The Watchman Group

3. Leverage a spousal IRA

If you’re a married couple filing jointly, there’s also a lesser-known option, known as a spousal IRA, which is a separate Roth or traditional IRA for nonworking spouses.  

Married couples can max out a pre-tax IRA for both spouses, assuming the working spouse has at least that much income. It’s possible to claim a deduction for both deposits.

But whether you’re making a single pre-tax IRA contribution or one for each spouse, it’s important to weigh long-term financial and tax planning goals, experts say.

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