Trump: It's okay for the Fed to hold steady, it might raise rates, trust Waller.

After the Federal Reserve kept interest rates unchanged for the fourth consecutive meeting, U.S. President Trump, in contrast to his previous frequent criticisms of the Fed, showed an unusually indifferent attitude toward the latest decision.

On Wednesday local time, after the G7 summit in France, Trump told reporters in Paris that the Fed keeping rates unchanged “doesn’t matter,” “whatever.” Regarding some Fed officials' projections in the dot plot indicating a possible rate hike later this year, Trump said, “It could indeed happen,” but also commented that hiking rates is “very unusual” and would drag down economic growth.

It’s worth noting that Trump, for the first time, publicly expressed support for the new Fed Chair Warsh. He said, “We have a very good person there now, and I will follow his lead.” Compared to his previous frequent criticisms of former Chair Powell, this shows that the relationship between the Trump administration and the new Federal Reserve is changing.

Trump’s Calm Reaction to Holding Rates: Whatever

On Wednesday, the Federal Open Market Committee (FOMC) unanimously decided to keep the federal funds rate target range at 4.25%-4.50%, in line with market expectations.

According to reports, after leaving the G7 summit, Trump was asked about the latest rate decision and responded quite calmly, saying “It’s all right. Whatever.”

This stands in sharp contrast to Trump’s previous long-term calls for the Fed to drastically cut rates.

In recent months, Trump has repeatedly and publicly criticized then-Fed Chair Powell, accusing him of being too slow in cutting rates, and at one point said that if Kevin Warsh were the Fed Chair, rates would fall faster.

However, Warsh, who just took over as Fed Chair, voted with the other FOMC members to hold rates steady in this meeting.

Trump did not express dissatisfaction with this, saying, “But we now have a very good candidate there, so I’ll listen to his views.”

Dot Plot Shows Rate Hike Preference, Trump: Hard to Believe, But It Could Happen

Besides holding rates unchanged, the updated economic outlook from this meeting also attracted market attention.

The dot plot showed that among the 18 FOMC officials offering policy forecasts, nine expect at least one rate hike this year, only one expects a rate cut; while in the previous dot plot after the March meeting, the general expectation was for one rate cut this year, and none expected a hike.

Regarding prospects for rate hikes, Trump initially said: “Hardto believe.” He believes raising rates suppresses economic activity: “It just makes a country stagnate. It’s very unusual.”

However, Trump later added: “It could also happen.”

According to reports, when commenting on the latest policy decision, Trump said, “It’s fine for them to keep rates unchanged, whatever.”

This statement shows that although Trump still disagrees with the logic of rate hikes, at least publicly, he is taking a more restrained attitude towards independent Fed decisions.

From Attacking Powell to Supporting Warsh, White House–Fed Relations Are Changing

Compared to the frequent pressure on Powell before, Trump’s attitude toward Warsh is noticeably different.

During Powell’s tenure, Trump repeatedly called for drastic rate cuts, often criticizing Fed policy for being “too late” or “too tight,” and even called Powell an obstacle to U.S. economic growth.

While selecting Powell's successor, Trump repeatedly praised Warsh, believed that he understood the importance of economic growth, and hinted he’d adopt a more accommodative monetary policy.

However, in Warsh’s first FOMC meeting after assuming office, he did not immediately start a rate-cut cycle, but instead voted with other members to keep rates steady.

Trump’s latest statement on Wednesday shows that while both sides might not fully agree on policy direction, the White House is at least temporarily accepting the new Fed’s policy rhythm.

Rising Expectations for Rate Hike This Year, Market Focus Shifts to H2 Economic Data

With half the dot plot's policymakers supporting a rate hike this year, market expectations for a hike have increased.

Movements in the currency market show the market believes a rate hike is possible in September, and pricing reflects traders have fully priced in expectations for a hike before October.

Analysts believe that if inflation heats up again, the internal debate about maintaining high rates or even further tightening may increase among policymakers.

Trump's “whatever” remarks on Wednesday mean, at least in the short term, that public pressure from the White House may temporarily ease.

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