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Donald Trump stepped up pressure on Federal Reserve Chairman Jay Powell to lower borrowing costs, setting up a potential showdown between the two less than a week before the US central bank meets to set interest rates.
During an Oval Office appearance Thursday to sign several new executive orders, Trump said he knew rates “much better” than the Fed, and would like to see them “much” lower.
The US central bank is expected to keep its benchmark rate between 4.25-4.5 percent next week, marking a pause after three consecutive cuts since September.
The Fed hinted at a slower pace of cuts this year with some officials concerned that Trump’s plan to raise tariffs, cut taxes and crack down on immigration will hamper efforts to return inflation to 2 percent.
“Concern [at the Fed] they are not just about tariffs, but also about the recognition that fiscal policy will not help reduce inflation,” said Mahmood Pradhan, economist at Amundi.
But the Fed’s more cautious stance puts it at odds with the new US president.
Trump on Thursday he said he expected the Fed to heed his requests and would talk to Powell “at the right time.”
“I think I know interest rates a lot better than they do, and I think I know them certainly a lot better than whoever is primarily in charge of making that decision,” Trump said. “If I disagree, I’ll make it known.”
Trump elevated Powell to head the Fed during his first term, but has often been critical of him, particularly for not cutting rates quickly enough in 2019. The president indicated during the campaign last year that he would not try to remove Powell before his term ends in 2026
“If the Fed continues to keep rates where they are and thinks it would be great to get a stimulus with lower rates, then there’s a real chance for conflict,” said Douglas Holtz-Eakin, president of the American Action Forum, a center-right policy institute.
Some economists have said that if Trump’s policies push up prices, it could force the Fed to refrain from further cuts or even raise borrowing costs.
“If the administration does things that actually start to increase the rate of inflation, the Fed’s mandate is quite clear – they will raise rates. And he will get it by the neck [from Trump] if they do,” said Mark Blyth, professor of economics at Brown University.
Trump used a speech to CEOs in Davos earlier on Thursday to say he wanted rates cut “all over the world” – and told the Opec cartel to crash oil prices for that to happen.
He touched on the subject again in an address to reporters in the Oval Office a few hours later.
“I’d like to see oil prices go down, and when energy goes down, that will kill a lot of inflation. It will automatically lower interest rates,” Trump said.
He also on Thursday raised new doubts about Washington’s commitment to NATO and called for more spending on the defense of America’s allies in the pact.
“They don’t protect us,” he said of NATO countries. “We protect them. So I don’t think we should spend, I’m not sure we should spend anything, but we should definitely help them. But they should increase their 2 percent [of GDP on defence spending] to 5 percent.”
Trump’s comments about NATO came a day after newly sworn-in Secretary of State Marco Rubio “reaffirmed the commitment of the US” to the group, according to a transcript of his conversation with the alliance’s Secretary General Mark Rutte.
Among the other executive orders Trump signed on Thursday was one creating a national cryptocurrency reserve and another authorizing the release of federal files on the assassinations of President John F Kennedy, former Attorney General Robert F Kennedy and civil rights leader Martin Luther King Jr. .
“The American people deserve transparency and the truth” about the killings, Trump said. “A lot of people have been waiting for this for years, decades, and everything will be revealed.”
