President Donald Trump fired his first salvo at the Federal Reserve, saying Thursday he would push to lower interest rates.
Addressing a gathering of world leaders at the World Economic Forum in Davos, the new president, in a wide-ranging policy speech, did not mention the Fed by name but made clear he would seek to lower rates.
“I will demand that interest rates be lowered immediately,” Trump said. “And likewise, they should fall all over the world. Interest rates should follow us everywhere.”
These comments were a first attack on Fed officials, with whom he had very contentious relations during his first term. He has frequently criticized Trump appointee Chairman Jerome Powell, sometimes calling policymakers “idiots” and comparing Powell to a golfer who can’t putt.
Stocks reacted little to the statements, although the policy-sensitive two-year Treasury yield fell slightly to 4.29%.
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In the whirlwind of activity that surrounded the president’s first week in office, he did not express his views on monetary policy. However, during the presidential campaign, he indicated that he should have a say in interest rate decisions.
For their part, Powell and his colleagues stressed the importance of the Fed’s independence. Powell, in particular, has often insisted that the central bank does not make decisions based on political considerations. Trump has no statutory authority over the Fed, although he appoints members of the Board of Governors.
The Fed’s independence is seen as essential to market stability, although the central bank has been criticized in recent years for calling the 2021 inflation surge “transitory”, which led to a series of aggressive increases.
Trump’s comments come less than a week before the Fed’s two-day policy meeting that ends Wednesday.
Markets give the Fed virtually no chance of further lowering its benchmark borrowing rate, which is currently targeted at a range between 4.25% and 4.5%, following a one-point reduction. percentage in the last four months of 2024. Traders expect a first rate cut to take place in June and a roughly 50-50 chance of another cut before the end of the year, data shows of the CME group.
The Fed cut its benchmark rate after raising it by 5.25 percentage points as part of its efforts to combat inflation. Even if inflation remains above the 2% rate set by the Fed, officials said policy does not need to be so restrictive because they envision a slowdown in price increases.
Trump blamed soaring inflation under former President Joe Biden on “wasteful deficit spending.”
“The result is the worst inflation crisis in modern history and extremely high interest rates for our citizens and indeed throughout the world. The prices of food and almost everything known to humanity have exploded ” he said.
A Fed official declined to comment on Trump’s remarks.
