President Donald Trump launched his first jab at the Federal Reserve, saying Thursday he would apply pressure to lower interest rates.
Speaking to a gathering of world leaders at the World Economic Forum in Davos, the new president did not mention the Fed by name in a wide-ranging policy speech, but made clear he would seek to lower interest rates.
“I will demand that interest rates be lowered immediately,” Trump said. “Similarly, they should fall around the world. Interest rates should follow us everywhere.”
The comments represent an initial blow to Fed officials, with whom he had a highly contentious relationship during his first term. He has frequently criticized Chairman Jerome Powell, a Trump appointee, at times calling policymakers “stupid” and comparing Powell to a golfer who can't putt a ball.
Markets reacted little to these statements. The 10-year Treasury yield was higher during the session at 4.64% after Trump spoke.
Amid the flurry of activity surrounding the president's first week in office, he did not discuss his views on monetary policy. However, he indicated during the presidential campaign that he should have a say in interest rate decisions.
For their part, Powell and his colleagues emphasized the importance of the Fed's independence. In particular, Powell has repeatedly insisted that the central bank does not make decisions based on political considerations. Trump has no legal authority over the Fed, although he nominates members to the Board of Governors.
The Fed's independence is seen as essential for stable markets, although the central bank has been criticized in recent years for dismissing a rise in inflation in 2021 as “temporary,” which led to a series of strong increases.
Trump's comments come less than a week before the Federal Reserve holds its two-day policy meeting that concludes on Wednesday.
Markets are assigning almost no chance that the Fed will cut its key borrowing rate, which is currently targeting a range of 4.25% to 4.5% after a full percentage point of cuts in the last four months of 2024. Interest in June, and a roughly 50-50 chance of another move before the end of the year, according to CME Group data.
The Federal Reserve lowered the funds rate after raising it by 5.25 percentage points as part of its efforts to combat inflation. Although inflation remains above the Fed's mandate of 2%, officials said policy does not need to be as restrictive as they see the pace of price increases as moderate.
Trump blamed the rise in inflation under former President Joe Biden on “wasteful deficit spending.”
“The result is the worst inflation crisis in modern history, very high interest rates for our citizens and even around the world. Food prices and the prices of almost everything else known to humanity have risen to the highest levels,” he said.
A Federal Reserve official declined to comment on Trump's statements.
