The Federal Reserve's decision this week to cut interest rates by 50 basis points marks the start of an easing cycle by the central bank on the cusp of the closest U.S. presidential election in nearly half a century. Since 1972, the Fed has changed interest rates in all but two presidential election years, and the Fed's actions are basically divided into two types: raising and lowering interest rates. The Fed's policy rate has risen in five election years and fallen in six election years. In most cases, these changes are part of a cycle that began a year or more before the election year.
In four of the five election years when interest rates rose, the incumbent president or the party that controlled the White House won reelection. Meanwhile, in five of the six election years when interest rates fell, the challenger to the incumbent president or the ruling party won. (Jin Shi)