Trump Team Pressures Fed Not to Hike Rates Ahead of Key Meeting

The Trump administration is urging the Federal Reserve not to raise interest rates in the upcoming meeting on September 15-16, despite markets pricing in a rate hike at about 60% probability. The president and his officials argue that growth itself does not cause inflation, and that additions to the supply side of the economy through tax cuts and strong capital investment expand the economy's capacity to grow without causing inflation.

The administration is led by President Donald Trump, who has been critical of the Fed in the past. In a recent post on Truth Social, he said that because the economy is growing so much, the U.S. should have the lowest interest rates in the world. Treasury Secretary Scott Bessent noted that the Fed typically doesn't raise rates during a supply shock until there are second- or third-order inflationary effects.

The administration's pressure campaign comes at a difficult time for Fed Chairman Kevin Warsh, who has emphasized the need to focus on inflation. In his speech in Jackson Hole, he said that 54% of the 199 components in the PCE price measure had risen more than 3% over the previous 12 months.