US President Donald Trump stated on Thursday that he would talk to the Federal Reserve if necessary and would try to cut interest rates by boosting energy production.
In an online speech, he said, "I'll demand that interest rates drop immediately," at the World Economic Forum in Davos, Switzerland. Similarly, they ought to be dropping everywhere. Interest rates ought to follow us everywhere.Congress has given the US Federal Reserve two mandates: to act independently to control inflation and employment, mainly through changes in short-term interest rates.
Trump has often lamented the fact that, as US president, he has no control over interest rate choices.
Later on Thursday, Trump told reporters in Washington that he would like to see interest rates drop "a lot," adding that reduced oil prices should contribute to that decline.
"Prices will drop when oil prices decline," he stated. "There won't be any inflation after that, and interest rates will decrease."
In response to a question about what he would do if the Fed did not cut interest rates, Trump stated that he would "put in a strong statement" and that he expected authorities to hear his opinions. He also mentioned that if necessary, he would think about speaking with Fed Chair Jerome Powell.
"I think I know interest rates much better than they do," he stated. And I believe I am unquestionably far more knowledgeable than the person who is largely responsible for making that choice. "They greatly influence me," he continued. "But I will express my disagreement."
Trump's comments come five days before the Fed's first policy meeting under his administration, which is scheduled for January 28 and 29. It is widely anticipated that policymakers would maintain current interest rates.
At its December policy meeting, the Fed last lowered its overnight interest rate target to between 4.25% and 4.5%, a quarter percentage point.
The Fed cut rates by a full percentage point for the entirety of 2024 as inflation pressures subsided and Fed members expressed a desire for monetary policy to have less of an impact on the economy's momentum. During the December meeting, authorities also revised their 2025 reduction forecasts in anticipation of higher inflation and marginally better GDP.
Trump's remarks about Fed interest rate policy are very out of character for presidents in the modern era and go against the Fed's mission to independently establish interest rate policy. A request for comment was not immediately answered by the Fed, which is exempt from any directives from the president.
As the US Federal Reserve may find itself at odds with the economic effects of US President Trump's budgetary policies, the global financial advice firm deVere Group issued a strong warning to investors to brace for substantial turmoil.
A major change in financial markets may result from the US Fed's possible response to the probable resurgence of rising inflationary pressures.
Experts claim that since assuming office, President Trump has intensified his aggressive tax cuts, tariffs, and fiscal stimulus plans. Although the goal of these policies is to boost economic expansion, they have also rekindled persistent worries about inflationary pressures.
This possible conflict is not a novel one. Trump's repeated disagreements with the US Fed about monetary policy during his prior presidency were widely reported.
Investors should brace for the consequences, as the Fed and the White House are probably already drawing battle lines, cautions Nigel Green, CEO of deVere Group.
The Fed may be forced to take action as a result of President Trump's actions, which are causing inflationary pressures to spiral out of control. This can cause the market to fluctuate significantly.
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