Trump Demands Lower Interest Rates, Hints at Clash with Federal Reserve
Davos, Switzerland - January 23, 2023
President Donald Trump has signaled a potential conflict with Federal Reserve Chair Jerome Powell and other central bankers. In a virtual address to the World Economic Forum, Trump demanded lower interest rates, citing falling oil prices.
"With oil prices going down, I'll demand that interest rates drop immediately," Trump told business leaders and politicians in Davos. He added that interest rates should decline "all over the world."
Trump's comments align with his previous statements on interest rates. At a press conference on January 7th, he asserted that "interest rates are far too high."
Potential Collision Course with Fed
Trump's remarks raise concerns about a potential collision course with Powell, who has indicated that interest rates may remain stable for a while. Investors expect no changes at the Fed's upcoming meeting next week.
Moreover, Fed officials have recently revised their forecasts and reduced the number of expected rate cuts in 2025 from four to two. This shift reflects concerns about the impact of Trump administration policies.
Trump's Broader Agenda
In his wide-ranging speech, Trump also addressed issues related to manufacturing and banking. He threatened tariffs on businesses that do not move their manufacturing operations to the US and engaged in a heated exchange with Bank of America CEO Brian Moynihan regarding access to banking services for conservatives.
Escalation of Rhetoric
Trump's latest comments on interest rates represent an escalation of his recent rhetoric concerning the central bank. During the 2020 presidential campaign, Trump's allies considered proposals that would undermine the independence of the Fed.
Despite initial attempts to reassure the public, Trump has reiterated his desire to influence monetary policy. He recently stated that he will not fire Powell but will express his views as President.
Powell's Stance
Powell has maintained his independence, stating that he has "no legal authority" to be removed before the end of his term in 2026. This stance has drawn support from business leaders, including Moynihan, who advocate for the Fed's independence.
However, Trump's inner circle includes critics ofPowell and the Fed. Treasury Secretary nominee Scott Bessent has suggested the appointment of a "shadow chair" to counter Powell. Elon Musk has recently criticized the central bank for being "overstaffed."
Business Leaders Caught in the Middle
Business leaders are navigating a complex situation, balancing their support for Fed independence with Trump's vocal criticisms. Scott Bessent has since retracted his "shadow chair" proposal and pledged to work cooperatively with Powell.
As the Trump administration continues to shape its economic policies, the relationship between the President and the Federal Reserve remains a key topic to watch. Investors and business leaders will be closely monitoring further developments to assess the potential impact on the economy and financial markets.