Trump Demands 1% Interest Rate Amid Fed Hike
US President Donald Trump has renewed his demand for significantly lower interest rates. On September 16, he tweeted that the Federal Reserve should set its benchmark rate at 1% or less because the US is the world's strongest credit.
The statement came shortly after the central bank raised borrowing costs by a quarter of a percentage point to 3.75%-4%, the first increase since July 2023. Trump has long argued that high interest rates put the country at a competitive disadvantage and pressed the Fed to reduce borrowing costs.
Fed Chair Kevin Warsh, who took over earlier this year, has warned that inflation remains too high. The central bank's latest statement said economic activity was expanding at a solid pace, productivity growth was strong, and capital investment remained robust.
The US government faces significant borrowing requirements, and investors expect higher yields on Treasury securities when they anticipate larger future government borrowing or higher inflation. This is why the Fed does not simply set rates according to the government's borrowing costs or the country's credit rating.