Interest Rates: Trump Demands Action, Fed Signals Caution
At the World Economic Forum, President Donald Trump voiced his intention to "demand" lower interest rates, citing falling oil prices as a justification. He emphasized that rates should "drop immediately" and "all over the world."
Trump's comments highlight the potential for a conflict with Federal Reserve Chair Jerome Powell, who has indicated that rates may remain stable following a reduction in 2024. Investors do not anticipate any changes at the upcoming meeting.
Fed officials have raised concerns regarding the potential impact of Trump administration policies, leading to a reduction in projections for rate cuts in 2025.
During his address, Trump also suggested that businesses relocate manufacturing to the US or face tariffs. He engaged in a heated exchange with Bank of America CEO Brian Moynihan, urging the latter to be more open to conservatives.
Trump's recent rhetoric represents an escalation in his commentary on the central bank. While he previously suggested wanting a voice in monetary policy, he had appeared to tone down his stance. However, during the 2024 campaign, he considered measures that could undermine central bank independence.
Powell has asserted that he has no legal authority to be removed before his term ends in 2026. Business leaders, including Moynihan, support Fed independence.
Despite Bessent's earlier suggestion of a "shadow chair," he has indicated a desire for a positive relationship with Powell. Bessent, Trump's Treasury Secretary nominee, has stated that the Fed should remain independent but that Trump will express his views as president.