Trump Demands Lower Interest Rates, Hints at Clash with Federal Reserve

Davos, Switzerland - President Donald Trump has hinted at a potential clash with Federal Reserve Chair Jerome Powell and other central bankers in his virtual address to the World Economic Forum. Trump declared that he would "demand" lower interest rates, stating that with oil prices declining, rates should also drop "immediately."

"Interest rates should follow us," Trump emphasized, indicating his desired direction for U.S. monetary policy. This comment raises concerns about a possible collision course between Trump and Powell in the coming months. Trump previously expressed his belief that interest rates are "far too high."

The Federal Reserve has signaled that rates may remain unchanged after a one-percentage-point cut at the end of 2024. Market participants anticipate no changes in rates at the upcoming meeting. However, Fed officials recently lowered their forecasts for additional cuts in 2025, citing concerns over the effects of Trump administration policies.

Trump's comments on rates came during a wide-ranging address where he also warned businesses that if they do not relocate manufacturing to the U.S., they will face tariffs. He also engaged in a contentious exchange with Bank of America CEO Brian Moynihan, urging him to "start opening your bank to conservatives."

The escalating rhetoric on interest rates from Trump is a notable departure from his previous attempts to appease concerns about undermining central bank independence. During the 2024 campaign, Trump allies considered plans to directly undermine the Fed's authority. However, Trump has since said he merely wants to provide input through public commentary.

Powell has firmly stated that there is "no legal authority" for him to be removed from his position before his term ends in 2026. Business leaders, including Moynihan, support Fed independence.

Meanwhile, critics of Powell and the Fed surround Trump. Treasury Secretary nominee Scott Bessent previously suggested appointing a "shadow chair" to undermine Powell, though he has since retracted this idea. Elon Musk has also criticized the central bank for being "absurdly overstaffed."

The conflict between Trump and the Federal Reserve remains a significant concern for business leaders, as independence is crucial for maintaining economic stability.