President Trump has threatened to pressure Federal Reserve Chair Jerome Powell and other officials to lower interest rates, according to a video call he made in Switzerland. This comes as economists warn that Trump’s remarks could undermine the Fed’s independence, potentially spurring inflation fears that could push long-term rates higher. Trump claimed to know interest rates better than the Fed and suggested that lowering oil prices would lead him to demand immediate rate cuts.
Analysts note that Trump’s comments stem from a pattern of trying to influence Fed decisions during his first term. For instance, last year, aides reportedly drafted a proposal to weaken the Fed’s independence by allowing the president to consult on interest rate decisions. In 2019, Trump also frequently criticized the Fed for not cutting rates enough amid economic weakness, raising questions about whether he could similarly pressure it now.
Fed officials have long been seen as insulated from political factors, making them decision-makers based solely on economic needs. However, Trump’s remarks raise real concerns about the Fed’s independence and its ability to act independently of his wishes or political influences. If the Fed does lower rates sooner than expected, markets might suspect Trump’s involvement, while failure to do so could spark fears that policymakers are prioritizing independence over economic considerations.
The central bank has hiked rates aggressively to combat inflation caused by the pandemic but has since started cutting rates in response to cooling demand and stabilizing inflation. Economists predict that fewer rate cuts remain on the table as Trump’s plans for tariffs and deporting immigrants could drive up costs for businesses and workers, potentially undermining future rate hikes.
While some experts dismiss the likelihood of Trump directly influencing Fed decisions, the threat he poses to traditional independence is increasingly seen as a real possibility. This uncertainty could weigh on markets and further complicate the Fed’s delicate mission of balancing economic growth and price stability.
Source: https://eu.usatoday.com/story/money/2025/01/23/trump-lower-rates-immediately/77912011007