Trump Demands Rate Cuts as Warsh Sends Hike Odds Soaring

US President Donald Trump has expressed his desire for lower interest rates, stating that the US should have the lowest interest rates in the world. This message is consistent with his previous statements against former Fed Chair Jerome Powell, whom he called 'too late'. In contrast to Powell, Trump praised new Fed Chair Kevin Warsh, but then urged him to cut borrowing costs.

Warsh has not followed Trump's advice so far, as the FOMC meetings in June and July left the rate unchanged. Three board members wanted a quarter-point hike, while Warsh removed forward guidance from the Fed's playbook and stressed that markets should read the economy instead of waiting for central bank decisions.

Warsh's Jackson Hole speech cemented his hawkish perspective, emphasizing inflation prints higher than desired but noting that underlying trends have not meaningfully improved. One hour after the speech, markets took a dip, and CME's Fedwatch tool signaled a hike could be in the cards.