Trump sets a necessary condition: willing to cut interest rates, "If you disagree, you will never be able to become the Fed Chair."
US President Donald Trump said on Tuesday that if the US economy performs well, he hopes the Federal Reserve Chairman will cut interest rates. Media analysis suggests this is the latest signal that, before announcing the replacement for current Fed Chair Jerome Powell, Trump tends to favor a candidate who firmly supports lowering interest rates.
On Tuesday, Trump wrote on social media:
“If the market performs well, I hope my new Fed Chairman will lower interest rates, rather than destroy the market for no reason.”
Trump has repeatedly stated that he intends to break a recent trend, in which good economic data has sometimes triggered market sell-offs in the past, because investors fear a resurgence of inflation and expect the Fed to raise rates.
Trump wrote:
“I want to see a market we haven’t seen in decades—where the market rises on good news, and falls on bad news. That’s how the market should behave, and that’s how it used to be.
The inflation issue will resolve itself; if not, we can always raise rates at the appropriate time—but ‘the appropriate time’ definitely isn’t just to kill a rally. A rally could potentially boost our country’s GDP by 10, 15, or even 20 percentage points in a year, maybe even more!”
He said:
“We will encourage a well-performing market to become even better, rather than making it impossible to keep rising. We will see more natural data, and data better than ever before.
Anyone who disagrees with me can never be Fed Chair!”
However, Tuesday’s market movements did not reflect what Trump described. Data released by the US Bureau of Economic Analysis showed that third-quarter GDP, adjusted for inflation, grew at an annualized rate of 4.3%, higher than almost all forecasts. Yet the S&P 500 index posted its fourth consecutive daily gain, and is on track for a record close.
Trump’s latest remarks come as he hopes to lower borrowing costs through new Fed leadership. As voter concerns over living costs intensify, Trump is feeling increasing political pressure. He has repeatedly said that lower rates help improve the real estate market, and noted that he hopes the future central bank chief will consult with him on interest rate decisions.
Last week, Trump said he had narrowed the list of Fed Chair candidates to “three or four people” and expected to make a decision soon, with the appointment to be announced “within the next few weeks.”
Trump previously hinted that White House National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh are the top contenders for the role. He has also interviewed and publicly praised current Fed Governor Christopher Waller.
Trump said:
“I think any of them would be a good choice.”
Earlier this month, the Fed lowered its benchmark interest rate to a range of 3.5% to 3.75%, marking the third consecutive meeting with a rate cut. Three committee members opposed the decision, while the Federal Open Market Committee has yet to reach agreement on whether to cut further. Trump previously called for the Fed to lower its benchmark rate to about 1%, or possibly even lower.
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