Donald Trump piles pressure on Federal Reserve chair Jay Powell to cut interest rates

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Donald Trump pressed Federal Reserve Chairman Jay Powell to cut borrowing costs, setting up a potential showdown between the two men a week before the US central bank meets to set interest rates.

In the Oval Office on Thursday to sign several new executive orders, Trump said he knew rates “Much better” than the Fed, and he’d like to see them go down “a lot.”

The U.S. central bank is expected to keep its benchmark interest rate on hold next week between 4.25 percent and 4.5 percent, marking a pause after three consecutive cuts since September.

It Fed has signaled a slower pace of cuts this year as some officials worry that Trump’s plan to raise tariffs, cut taxes and crack down on immigration will derail efforts to keep inflation below 2 percent.

“The concerns [at the Fed] It’s not just about tariffs, it’s also about fiscal policy not helping to 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 listen to his demands and talk to Powell “in due course.”

“I think I know the interest rates a lot better than they do, and I think I certainly know them a lot better than whoever is primarily responsible for making that decision,” Trump said. I will inform about it.”

Trump promoted Powell to the Fed chair during his first term, but often criticized him for not cutting interest rates quickly enough in 2019. The president indicated during the campaign last year that he would not try to remove Powell from his post his term of office ends in 2026.

“If the Fed continues to keep interest rates where they are, and it thinks it’s OK to push lower rates, there’s a real chance of conflict,” said Douglas Holtz-Eakin, president of the right-wing American Action Forum institute of centrist politics.

Some economists say if Trump’s policies raise prices, it could force the Fed to hold back on further tapering or even raise borrowing costs.

“If the administration does things that really start to raise the rate of inflation, the Fed’s mandate is quite clear. they will raise interest rates. And they will get it in the neck [from Trump] if they do,” said Brown University economics professor Mark Blythe.

Earlier on Thursday, Trump said after a speech in Davos that he wanted interest rates to come down “all over the world” and told the OPEC cartel: lower oil prices for this to happen.

A few hours later, in his speech to journalists, he touched on the topic again.

“I’d like to see oil prices come down, and when energy comes down, that will bring down a lot of inflation. That will automatically bring down interest rates,” Trump said.

He also on Thursday raised fresh doubts about Washington’s commitment to NATO and called for more defense spending by US allies under the pact.

“They don’t protect us,” he said of NATO countries. “So I don’t think we should spend, I’m not sure we should, but we Of course we have to help them, but they have to raise their 2 percent [of GDP on defence spending] up to 5 percent.”

Trump’s NATO comments came a day after new Secretary of State Marco Rubio “reaffirmed US commitment” 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 documents 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. “Many people have been waiting for this for years, decades, and everything will be revealed.”