Amid calls for "continuous interest rate hikes," Trump demanded that the Federal Reserve cut interest rates: the US should have the lowest interest rates in the world.
Despite higher-than-expected inflation and market betting on interest rate hikes, Trump continues to pressure the Federal Reserve to lower borrowing costs.
"The United States is so powerful that we should pay the lowest interest rates in the world, no matter how their formula works," Trump told reporters on Sunday, September 13, while attending the Irish Open in Ireland.
This statement came at a sensitive time: just two days earlier, the US August CPI data was released, showing a larger-than-expected increase. According to Bloomberg, the market immediately raised its expectations for a Federal Reserve rate hike significantly—the probability of a September rate hike rose to 86%, with two rate hikes anticipated this year.
When asked if he expected the Federal Reserve to raise interest rates at its meeting next week, Trump replied, "I don't know."
Trump's pressure goes beyond rhetoric. In early September, Trump hinted that if the Federal Reserve did not cut interest rates, he would consider cutting off trade with economies that had trade deficits. On Sunday, when reporters pressed him on whether he would actually carry out this threat, he stated unequivocally: "Yes, I will do that with certain countries." "This will be done gradually over time."
Trump also said on the same day: "I know the formula better than anyone. With the best credit in the world, we are making other countries richer. We can turn this switch off in two minutes."
Warsh Research Institute faces pressure as interest rate hike expectations rise.
Federal Reserve Chairman Warsh is currently facing increasing pressure to raise interest rates.
The August CPI data exceeded expectations and was widely interpreted by the market as a signal to prompt the Federal Reserve to raise interest rates for the first time in three years. While Warsh, after taking over as Fed chairman, has not faced the same frequency of public criticism from Trump as his predecessor Powell, Trump has clearly expressed dissatisfaction with the Fed's policy stance in recent weeks.
Trump has repeatedly criticized Powell for his reluctance to more aggressively lower borrowing costs. Regarding Warsh, he suggested that the latter's hands might be tied by what he called a "very politicized" Federal Reserve board.
Multiple pressures besiege the Federal Reserve
The Federal Reserve is currently facing a rather complex macroeconomic environment.
The Iraq War has entered its seventh month, and energy prices continue to rise. Meanwhile, Trump's tariff policies are further fueling inflationary pressures, making the Federal Reserve's path to achieving its inflation target even more challenging.
On the political front, voters gave Trump low marks for his handling of war and the economy. Rising cost of living—covering energy, housing, healthcare, and groceries—has become one of the most pressing issues for voters ahead of the November midterm elections. Republican control of Congress is under threat.
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