The Effect of The Presidential Campaign on the Economy .
Although it is difficult to predict the future of the economy, it is important to look at all factors that could influence it in the future. One of these factors could be the up and coming Presidential Campaign.
Once the candidates and then the nominations are decided every word the Executive Branch and Congress say will be over-scrutinized and media attention will be high. The Federal Reserve Board usually ‘shut down’ for a few months prior to an election to avoid the slightest indication of bias towards any party, although they would never openly admit to this. However, if they acted now there is still time for the FED to undertake stimulus activity to aid the debt crisis. This could be beneficial in light of the recent elections in Europe that have highlighted the fact that the debt crisis there still has the attention of the world.
There could be 2 benefits to the pause , lower interest rates and lower oil prices. In the wake of the tepid jobs report, the reaction was as expected. Rates eased down a bit in the wake of the news. And oil prices corrected significantly. Why did oil prices move more quickly than rates? Because oil prices had run up significantly this year while rates had risen more moderately. Oil prices were being affected by potential supply disruptions as well as the economy. If you look at both sectors, prices are now back to where they were a few months ago. A word of warning. While lower rates and lower gas prices are both welcome news, a reversal in these trends could be at any time in the near future. If the pause continues we should enjoy these lower levels for a longer period of time, but there is no real way of knowing if the pause will be with us for long. However, rates are again at record lows and it’s hard to predict when the will change.