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Donald Trump has stepped up pressure on Federal Reserve chairman Jay Powell to reduce borrowing costs, setting up a potential clash between the two men a week before the US central bank meets to set interest rates.
During his appearance in the Oval Office on Thursday to sign the new executive orders, Trump said he knew fees “much better” than the Fed, and would like to see them go down “a lot”.
The US central bank is expected to hold its benchmark interest rate between 4.25-4.5 percent next week, marking a break after three consecutive cuts since September.
The Feed has shown a slower pace of cuts this year with some officials concerned that Trump’s plan to raise tariffs, cut taxes and restrict immigration will hamper efforts to reduce inflation to 2 percent.
“The concern (for the Fed) is not only about rates, but also the realization that monetary policy will not help bring down inflation,” said Mahmood Pradhan, an economist at Amundi.
But the Fed’s more cautious stance puts it on a collision course with the new US president.
Trump on Thursday he said he expected the Fed to listen to his demands and would talk to Powell “at the appropriate time”.
“I think I know interest rates better than they do, and I think I know them better than whoever is responsible for making that decision,” Trump said. “If I don’t agree, I’ll make it known.”
Trump promoted Powell to the Fed chair during his first term in office, but he often criticized him, particularly for not cutting rates fast enough in 2019. olo last year that he would not try to remove Powell from his position. before his term expires in 2026.
Douglas Holtz-Eakin, president of the American Action Forum said: center rights policy center.
Some economists have said that if Trump’s policies raise rates it could force the Fed to either reduce the rate cut or raise borrowing costs.
“If the administration does things that actually start to raise the inflation rate, the Fed’s mandate is clear – it will raise prices. And they will get it in the neck (from Trump) if they do,” said Mark Blyth , professor of economics at Brown University.
Trump used a speech to Davos officials earlier on Thursday to say he wanted rates to fall “around the world” – and told the Opec group to lower oil prices to make that happen.
He touched on the topic again in his Oval Office speech to reporters a few hours later.
“I would like to see oil prices come down, and when energy comes down, that will take away a lot of inflation. That will automatically lower interest rates,” Trump said.
Also on Thursday he raised new doubts about Washington’s commitment to Nato and called for increased use of defense by US allies in the alliance.
“They don’t protect us,” he said of Nato countries. “We protect them. So I don’t think we should spend money, I’m not sure we should spend anything, but we should help them. But they should raise two percent (of GDP on defense spending) to 5 percent.”
Trump’s Nato comments came a day after Secretary of State Marco Rubio’s swearing-in “reaffirmed US commitment” to the group, according to a report of his conversation with alliance secretary-general Mark Rutte.
Among the executive orders Trump signed on Thursday was the creation of a public cryptocurrency repository and one authorizing the release of federal files on the assassination 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. “Many people have been waiting for this for years, decades, and all will be revealed.”
