US: The FOMC and the presidential election – Goldman Sachs

Alec Phillips, Research Analyst at Goldman Sachs, comments on the history of Fed actions ahead of presidential elections.

Key Quotes

“The FOMC has raised rates shortly before elections—September 2004 is a recent example—but has not hiked in October or the first days of November prior to the election.

The FOMC has also avoided surprising the market in election years; no preselection rate hike in an election year has been less than 90% discounted by the fed funds futures market by the time of the meeting.

A review of FOMC transcripts in prior election years shows scant discussion of the effect of election timing on policy decisions, but what discussion does exist suggests that the FOMC has felt free in previous election years to take the appropriate action but has been somewhat cautious about the public perception of political influence.”