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Donald Trump has increased pressure on Federal Reserve Chairman Jay Powell to lower borrowing costs, setting up a potential clash between the two men less than a week before the US central bank meets to set interest rates.
During his appearance in the Oval Office on Thursday to sign several new executive orders, Trump said he knew that Rates “Much better” than the Fed, and he would like to see it go down “a lot.”
The US central bank is widely expected to keep its benchmark interest rate between 4.25 and 4.5 percent next week, marking a temporary pause after three consecutive cuts since September.
the Federal Reserve Bank The Fed has signaled a slowdown in the pace of cuts this year, with some officials concerned that Trump's plan to raise tariffs, cut taxes and crack down on immigration will hamper efforts to get inflation down to 2 percent.
“The concerns (at the Fed) are not just about tariffs, but also the recognition that fiscal policy will not help bring down inflation,” said Mahmud Pradhan, an economist at Amundi.
But the Fed's more cautious stance puts it on a collision course with the new US president.
Trump He said on Thursday that he expected the Fed to listen to his demands and would speak with Powell “at the appropriate time.”
“I think I know interest rates a lot better than they do, and I think I certainly know them a lot better than the person who was primarily responsible for making that decision,” Trump said. “If I don't agree to it, I'll tell you.”
Trump elevated Powell to Fed chair during his first term, but has often criticized him, particularly for not cutting interest rates quickly enough in 2019. The president indicated during his campaign last year that he would not try to remove Powell from his position. . Before his term ends in 2026.
“If the Fed continues to keep interest rates where they are and thinks it would be nice to get a boost from lower interest rates, there will be a real chance for conflict,” said Douglas Holtz-Eakin, president of the American Action Forum. Center-Right Policy Institute.
Some economists said that if Trump's policies lead to higher rates, it could force the Fed to hold back further cuts or even raise borrowing costs.
“If the administration does things that actually start to raise the inflation rate, the Fed’s mandate is pretty clear — they will raise interest rates. They will get a head start (from Trump) if they do that,” said Mark Blyth, an economics professor at Brown University.
Trump used a speech to executives in Davos earlier Thursday to say he wants to cut interest rates “all around the world” — and asked OPEC to do so. Reducing oil prices To achieve this.
He touched on the topic again in his statements to reporters in the Oval Office a few hours later.
“I would like to see oil prices go down, and when energy prices go down, that would take out a lot of inflation. That would automatically lower interest rates,” Trump said.
On Thursday, he also raised new doubts about Washington's commitment to NATO and called for increased defense spending by US allies in the treaty.
“They are not protecting us,” he said of NATO countries. “We are protecting them. So I don't think we should spend, I'm not sure we should spend anything, but we should definitely help them. But they should raise the 2 percent (of GDP on defense spending) to 5 percent The hundred.
Trump's comments at NATO came a day after Secretary of State Marco Rubio, who was sworn in, reaffirmed the United States' commitment to the group, according to a log of his conversation with NATO Secretary-General Mark Rutte.
Among other executive orders Trump signed Thursday were one to create a national stockpile of cryptocurrencies and another to allow the release of federal files related to the assassinations of President John F. Kennedy, former Attorney General Robert F. Kennedy, and civil rights leader Martin Luther King Jr. .
Trump said: “The American people deserve transparency and the truth” about the killings. “A lot of people have been waiting for this for years, decades, and everything will be revealed.”
