Trump Demands 1% Fed Rate, Ignoring Economists' Warnings of Market Turmoil

U.S. President Donald Trump is pushing for a significant reduction in the Federal Reserve's benchmark interest rate, calling for it to be cut to 1%. However, economists warn that such a move would trigger widespread turmoil in the global financial system.

The current U.S. benchmark rate is in the 3.75-4% range, and cutting it by three percentage points could fuel inflation, weaken the dollar, and drive up government bond yields. This could ultimately lead to higher borrowing costs for the U.S. government.

Some analysts believe that Trump's calls for a 1% rate are not intended as a serious economic plan, but rather as a way to shift attention away from high consumer prices ahead of the midterm elections in November.

Jay Benson Durham, founder of DASM investment research firm, warned that cutting rates by three percentage points would be catastrophic. He stated that Treasury yields would rise due to expectations of higher inflation, and other countries could attract capital by offering investors slightly higher yields than the United States. This would put additional pressure on the U.S. currency.