Trump Presses Warsh for Rate Cut as Markets Price Higher Chance of Hike
U.S. President Donald Trump has urged Federal Reserve Chair Kevin Warsh to cut interest rates, stating that they are excessively high. Speaking in the Oval Office on September 1st, Trump expressed his respect for Warsh, but emphasized that 'our (U.S.) interest rates are too high.' He also claimed that 'success and growth do not cause inflation,' adding that 'in many cases, rates should be lowered instead'.
Trump's comments come after Warsh's remarks at the Jackson Hole Economic Policy Symposium on September 28th. Warsh stated that the Fed must be confident in its target for underlying inflation before making any decisions, and suggested that interest rates could rise if price increases do not slow sufficiently. Financial markets responded to Warsh's speech by pricing a higher chance of a rate hike at the Federal Open Market Committee's (FOMC) September 15-16 meeting.
The probability of a September rate hike rose to about 60% after Warsh's speech, according to CME FedWatch. Trump's intervention may add further uncertainty to the Fed's decision-making process, as he repeatedly urged Warsh to cut rates and expressed his desire for U.S. interest rates to be the lowest in the world.