President Donald Trump has made it clear that his administration will push the Federal Reserve to lower rates while he is in office.
Speaking via video, President Trump assured an assembly of global leaders at the World Economic Forum in Davos that he would push for reduced rates.
“I’ll demand that interest rates drop immediately,” Trump said, per CNBC.
“And likewise, they should be dropping all over the world. Interest rates should follow us all over.”
Since September, the Federal Reserve has cut rates three times for a total reduction of one percentage point. The final 25 basis point cut in December brought the key interest level down to a target range of 4.25%- 4.5%, the same level it was in December 2022, but still substantially higher than the near zero witnessed during the pandemic financial fallouts.
Trump has long disagreed with the sitting Federal Reserve Chairman Jerome Powell over his decisions at the central bank. Trump has even insisted he should have a say in Fed rate decisions.
“I feel the President should have at least a say in there. I feel that strongly… I made a lot of money. I was very successful. And I think I have a better instinct than, in many cases, people that would be on the Federal Reserve — or the chairman,” Trump said during a press conference last year, per CNN.
Equity markets reacted positively to Trump’s messaging about interest rates. This was the President’s first mention of the country’s monetary policy since taking office.
Powell has repeatedly reiterated that the Fed operates independently. While Trump has said he will demand rates be lowered, the U.S. President does not have statutory authority over the country’s central bank. However, the President does get to nominate members to the bank’s board of governors, providing indirect yet meaningful influence.
The Fed is expected to hold its next meeting on January 28 and 29. As it stands, markets are pricing in no change to interest rates at the next meeting. Traders expect the next rate cut to likely occur in June, with a 50% chance a second cut will happen before the year ends.
The inflation trajectory could be the defining factor influencing how the Federal Reserve proceeds. While interest rates have come down a full percentage point, inflation still sits above the Fed’s target of 2%, prompting the bank to take a more cautious approach.
“The result is the worst inflation crisis in modern history, and sky-high interest rates for our citizens and even throughout the world. Food prices and the price of almost every other thing known to mankind went through the roof,” said Trump.