FOMC Rate Changes During Presidential Election Years

Do the FOMC rate changes influence the presidential elections? If so, how much? We find out!


We analyzed the FOMC rate changes from 1991 until July 2023 and the presidential elections and results for the same time period. The first question we wanted to answer was if there are typically rate changes du ring a presidential election year.

We found that most years since 1991 have had a rate change, either a cut or an increase. Seven of the eight presidential elections since 1991 have had a rate change. Of those seven election 4 contained a rate cut and 3 contained a rate hike.

We also wanted to understand if there were incumbent presidential elections included in these. Of the eight elections during this time period, four were incumbent elections, with the current president running.

We also wanted to understand if these changes influenced the results of these incumbent races or not. Of these four years with incumbents running, two resulted in a win and two resulted in a loss.

Of these incumbent elections, were they striated by cuts or hikes? We looked at the cuts first and found that two of the three elections with incumbent rate cuts results in a loss.

When it comes to rate hikes, there was only one incumbent election, resulting in a win.

We also reviewed if the losses or wins had any commonality with rate changes.  We saw that when there were 5 rate cuts, the incumbent lost. When there were 5 rate hikes, the incumbent won, with an incumbent wining once with a rate cut.

Results

We found that most of the data is mixed. The only trend we could identify seemed to be that the more rate hikes that took place the more likely an incumbent candidate was to win the presidential election – and when rates were cut, the incumbent tended to lose.

We do take these findings with a grain of salt however, considering the low sample sizes.