Trump Pressures Fed Amid Soaring Oil Prices and US Bond Yields
US President Donald Trump is urging the Federal Reserve to lower interest rates to 'the lowest in the world', while at the same time pushing Silicon Valley to accelerate AI development.
The move has been described as a tug-of-war between easier money and hotter inflation, with traders not leaning towards rate cuts despite rising oil prices and US government bond yields near 5% for the first time since October 2023.
Rising energy costs due to escalating Middle East tensions have kept crude elevated, leading to higher fuel, transport, and production costs that can filter into broader inflation. Higher US yields are also pulling other countries' rates up, as global investors compare returns across big bond markets.
The 5% US 10-year Treasury yield is seen as a risk-free benchmark in stock valuation, making it harder for growth-heavy AI-linked stocks to justify their rich prices. The rising hurdle rate can squeeze valuations through 'multiple compression', where investors are willing to pay less per dollar of profit.