President Donald Trump fired his first salvo at the Federal Reserve on Thursday, saying he would push to lower interest rates.
Addressing a gathering of world leaders by video at the World Economic Forum in Davos, Switzerland, the new president did not mention the Fed by name in his wide-ranging policy speech, but vowed to push for interest rate cuts. did.
President Trump said, “I demand an immediate reduction in interest rates.” “Equally, interest rates should fall around the world. Interest rates should follow suit around the world.”
The comments marked his first attack on Fed officials, with whom he had a highly contentious relationship during his first term. He has frequently criticized Jerome Powell, the Trump-appointed chairman, calling the policymaker a “bonehead” and at one point comparing Powell to a golfer who can’t putt.
The stock market reacted slightly favorably to the comments, with the Dow Jones Industrial Average rising during President Trump’s remarks, and the policy-sensitive two-year Treasury yield falling slightly.
Amid the flurry of activity surrounding the president’s first week in office, he has not discussed his views on monetary policy. However, during the presidential campaign, President Trump expressed the idea that the government should have a say in determining interest rates.
Mr. Trump told reporters later in the day that he expected the Fed to listen to him and said he planned to speak with Mr. Powell “at the appropriate time.”
Mr. Powell and others have emphasized the importance of the Fed’s independence. Mr. Powell, in particular, has frequently argued that central banks do not make decisions based on political considerations. Although Trump appoints board members, he has no legal authority over the Fed.
2 year yield
The Fed’s independence is seen as essential to market stability, but the central bank has been criticized in recent years for dismissing the 2021 inflation spike as “temporary,” leading to a series of aggressive interest rate hikes.
President Trump’s comments came less than a week before the Federal Reserve holds a two-day policy meeting that ends Wednesday.
The market sees virtually no chance of the Fed lowering the benchmark borrowing rate further, which is currently targeted at a range of 4.25% to 4.5% after being fully lowered in the final four months of 2024. It has become. The first rate cut is likely to occur in June, with a 50-50 chance of further cuts before the end of the year, according to CME Group data.
The Fed raised the funds rate by 5.25 percentage points to combat inflation, then lowered it. Inflation remains above the central bank’s 2% target, but officials say they see the pace of price rises slowing and there is no need for policy to be as restrictive. .
President Trump blamed soaring inflation under former President Joe Biden on “wasteful deficit spending.”
“The result was the worst inflation crisis in modern history, sending interest rates soaring not only for our people but around the world. Food prices and the price of just about everything else known to humanity went through the roof.” said.
Federal Reserve officials declined to comment on Trump’s remarks.
