The Democrats are arriving in Chicago, the country’s third-largest city, for their first in-person convention in eight years. The gathering comes at a pivotal time for the party, which switched its presidential nominee only weeks ago, and for the city, which is regaining its swagger after a pandemic slump.

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Democrats this week will enshrine one of the most audacious power plays in modern political history as they gather for a convention that was hastily reconfigured to try to vault Kamala Harris to a historic presidency.

It begins with adulation for President Joe Biden, who will speak Monday night to a crowd grateful that he belatedly agreed to pass the torch. But the moment will be bittersweet for the 81-year-old president, who, despite a productive tenure, was pressured by his own party leaders to end his reelection bid when a 50-year career succumbed to the ravages of age.

Biden told Americans last month when he announced his departure from the race that “History is in your hands. The power’s in your hands. The idea of America lies in your hands.” The response from his party was a swift coalescing behind Harris, 59, as hopes of some activists for a multi-candidate race among Democratic rising stars were dashed.

With Harris and Minnesota Gov. Tim Walz leading their new ticket, Democrats now hope to thwart a White House comeback by Donald Trump amid panic over the prospect of a second term he plans to devote to “retribution.”

Republicans left their convention in Milwaukee a month ago, convinced they were heading for a landslide victory under a candidate who emerged bloodied but defiant from an assassination attempt. At that point, the Democratic National Convention was shaping up as a grim valediction for an aging president who was losing to Trump in key states. But Harris has sent a jolt of electricity and joy through her party, mending some of the potentially catastrophic splits in Biden’s coalition.

She’s pulled into a narrow lead over Trump in some national polls, reestablishing a neck-and-neck race with the former president in survey averages. And she’s restored multiple paths for Democrats to secure the 270 electoral votes needed to win the White House. The mood shift in the party is astonishing, even if Harris’ biggest tests still lie ahead.

“First of all, you were talking about a reelection nomination, a renomination. And now you’re talking about something completely different,” J.B. Pritzker, the Democratic governor of Illinois, said on CNN’s “State of the Union” on Sunday. “This is a candidate who’s energized the party in a way that I haven’t seen certainly since ’08.”

The refashioning of the race has left Trump — seeking to become only the second one-term president to win a non-consecutive second term — disorientated and pining for his matchup against Biden, whose hopes dissolved after his disastrous performance at the CNN debate in June.

The Republican nominee has raged through a string of unhinged campaign events that have left party strategists despairing and pleading with him to focus. Harris hasn’t faced tough questions yet in an unscripted event, but she has been successful in styling herself as the change agent in the race despite spending four years playing a key role in Biden’s unpopular presidency.

Democrats know ‘history’ is in their hands

The party’s late attempt to save what many officials believe is the most critical election in a generation is fraught with risk.

Democrats have put their fate in the hands of a vice president who was not seen as one of her party’s strongest political forces. Remarkably for a party nominee, Harris has yet to earn a single vote for president. She ended her first campaign in 2019 before the Iowa caucuses and claimed the nomination this time by acclamation after a virtual roll call of delegates rather than in a primary contest. She faces a critical debate clash with Trump on September 10, and her capacity to maintain the momentum of the campaign could be tested in future television interviews.

Democrats are meeting under the historic shadow of the 1968 convention in Chicago, when activist violence sparked by the war in Vietnam transmitted an unflattering picture of the party to Americans who eventually embraced a right-wing Republican law-and-order message. There are other parallels to that fateful convention — it featured a Democratic vice president, Hubert Humphrey, who was trying (and ultimately failed) to win the election after the sitting president (Lyndon B. Johnson) was forced to pull out of his reelection race.

Demonstrations are again expected in the week ahead, especially among pro-Palestinian supporters who have hounded Biden over his support for Israel after tens of thousands of civilians have been killed in the war in Gaza. It is not, however, clear whether progressive and Arab American voters who registered protest votes against Biden in the primaries — especially in the key swing state of Michigan — will pose a similar threat to Harris’ hopes in November.

Harris will be under extraordinary pressure with her speech Thursday night to introduce herself to Americans still unfamiliar with her life story and ideas. This is where Biden’s Monday address will be especially crucial as he hands over the political reins of the party to Harris, even while he’s still president.

To reinforce the pivot, Democrats will turn to former President Barack Obama on Tuesday night. Twenty years after he burst onto the scene as an unknown Illinois legislator with an electrifying convention speech, and nearly eight years since he left the White House, the party will again rely on the 44th president’s rhetorical skill.

Harris has barely put a foot wrong in infusing her party with a spirit of Obama-style optimism and hope. A rocking convention could project a spirit of unity and give her a polling bounce heading into the final stretch of the race.

Harris, benefiting from the generational comparison to Biden, 81, and Trump 78, is styling her new campaign as a fight for America’s future against a backdrop of historic possibility: If elected in November, she’d be the first Black female president and first Indian American president. At a rowdy rally in Philadelphia earlier this month at which she introduced Walz as her running mate, Harris rooted her appeal to voters in freedom — of economic opportunity, reproductive and voting rights, and the right to be safe from gun violence. “Tim and I have a message for Trump and others who want to turn back the clock on our fundamental freedoms: We’re not going back,” she said.

Harris, a former prosecutor and attorney general of California who put financial and sexual offenders behind bars, also coined a new message against Trump, who has been indicted four times and is awaiting sentencing after he was convicted in a hush money trial in New York. “I took on perpetrators of all kinds — predators who abused women, fraudsters who scammed consumers, cheaters who broke the rules for their own gain. So, hear me when I say: I know Donald Trump’s type,” she said.

Two polls released on the eve of the convention — from CBS News/YouGov and ABC News/The Washington Post/Ipsos — showed the vice president with a narrow lead over the ex-president. And battleground surveys show Harris is competitive in the must-win “blue wall” states of Wisconsin, Michigan and Pennsylvania. She’s also reopened multiple pathways to the White House, including through Sun Belt states that appeared closed off when Biden was the nominee.

Yet Harris is only at the beginning of a showdown with Trump, who has shown he’ll do anything — including threatening democracy — to win power. The former president has, for example, started to refer to the switch from Biden to Harris as an unconstitutional “coup,” raising fears he’s laying the groundwork to challenge another democratic election if he loses in November.

Trump unleashed a fresh attack on Harris over the weekend after she unveiled her economic plan, which included a vow to lower the cost of housing and to use federal power to crack down on supermarket giants that she accused of price gouging. Trump seized on criticism from many mainstream economists that the plan equated to price controls in state-run economies that made staples scarce in grocery stores.

Harris’ approach, which is strikingly populist and progressive, represents a gamble since Trump is already trying to portray her as an ultra-liberal and Venezuela-style socialist or a communist.

But while it employs questionable economics, the Harris plan could score in a political sense. She’s courting voters worn down by years of inflation and high prices following the pandemic. Most polls still show Trump is more trusted on the economy than she is. But at his rally in Pennsylvania on Saturday, Trump showed signs of concern that Harris had outflanked him on an issue on which his campaign has tried to anchor the election. He described the vice president’s plan as “very dangerous because it may sound good politically, and that’s the problem.”

Biden had cast his race against Trump as a fight for the soul of the nation and a vital quest to preserve democracy. But he also struggled to reconcile his own unpopularity, especially on the economy, with a presidency that, in legislative terms, may be the most prolific Democratic administration since Johnson’s.

His prime-time address on the first night of the convention — instead of as originally scheduled on the last night, which is the spot reserved for the nominee — will poignantly underline the switch in the Democratic ticket.

At his first formal event with Harris since he folded his reelection bid, Biden seemed moved by his reception from her crowd in suburban Maryland. That was likely a taster for the love that will rain down from the rafters of Chicago’s United Center for a president who, for all his reluctance to leave the race, is viewed by his party as an exemplar of political self-sacrifice and patriotism.

“President Biden will go down in American history as one of the most consequential presidents of all time,” House Democratic leader Hakeem Jeffries told CNN’s Jake Tapper on Sunday. “He made a very selfless decision to pass the torch to Vice President Harris, who’s a courageous leader, a compassionate leader and a commonsense leader.”

That is exactly the message Democrats hope millions of Americans will take away from their convention.

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The US Federal Reserve needs to take a gradual approach to lowering borrowing costs, one of its top officials has said, as the world’s leading central bankers prepare to gather at an annual meeting in Wyoming this week.

Mary Daly, president of the San Francisco Fed, told the Financial Times that recent economic data have given her “more confidence” that inflation is under control. It is time to consider adjusting borrowing costs from their current range of 5.25 per cent to 5.5 per cent, she said.

Her call for a “prudent” approach pushed back on economists’ concerns that the world’s largest economy is heading for a sharp slowdown that warrants rapid cuts in interest rates.

The speed with which US rates will ease from their 23-year high will be a central question on the lips of policymakers when they gather later this week at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming.

Fed chair Jay Powell’s speech there on Friday will be closely scrutinised by investors keen to hear how he plans to pull off a soft landing, completing the fight against inflation without crashing the economy.

Daly, who votes on the Federal Open Market Committee, played down the need for a dramatic response to signs of a weakening labour market, saying the US economy was showing little evidence of heading for a deep downturn. The economy was “not in an urgent place”, she said.

“Gradualism is not weak, it’s not slow, it’s not behind, it’s just prudent,” she said, adding the that labour market — while slowing — was “not weak”.

Investors are betting on a rate cut at next month’s Fed meeting, in what would be the first drop in interest rates in four years. Markets are pricing in about a 70 per cent chance of a quarter-point cut, while a minority of investors expect a half-point move.

Markets expect US interest rates to end 2024 a full percentage point below their current level, implying one extra-large cut in the final three meetings of the year.

The Bank of England, European Central Bank and Bank of Canada have already lowered borrowing costs, but relatively high US inflation readings at the start of this year forced the Fed to wait.

Consumer price figures last week showed inflation fell to 2.9 per cent in the year to July, a three-year low. The Fed’s preferred gauge of underlying price pressures, the price index on core personal consumption expenditures, rose at an annual rate of 2.6 per cent in June. Headline PCE inflation, on which the 2 per cent target is based, was 2.5 per cent in June.

“After the first quarter of this year, inflation has just been making gradual progress towards 2 per cent,” Daly said, speaking on Thursday. “We are not there yet, but it’s clearly giving me more confidence that we are on our way to price stability.”

With inflation in retreat and the labour market coming into better balance, the central bank has to “adjust the policy rate to fit the economy we have and the one we expect to have”.

Daly said the Fed wanted to loosen the “restrictiveness” of its policy, while still maintaining some restraint to “fully get the job done” on inflation.

The Fed did not “want to overtighten into a slowing economy”, she said. She later added that failing to adapt policy to progress on inflation and lower growth was a “recipe for getting the result we don’t want, which is price stability and an unstable and faltering labour market”.

Her remarks chime with those of Atlanta Fed president Raphael Bostic, who recently told the FT that waiting too long to lower interest rates “does bring risk”.

July’s weak jobs report raised concerns over the health of the US economy and helped trigger a global sell-off in equities that sparked calls for emergency rate cuts. But this week’s surprisingly strong retail sales report tempered fears of a US recession.

Daly said businesses were generally not resorting to lay-offs. Instead they were cutting discretionary spending to adapt to what was no longer a “frothy world” of “unbridled growth”.