Trump Threatens Trade Halt Unless Fed Cuts Rates
President Donald Trump is once again calling on the Federal Reserve to cut interest rates, this time threatening to halt trade with countries that have a trade deficit with the US if the central bank does not comply. In a Truth Social post, Trump argued that a stronger US economy should translate into lower borrowing costs and said he wants the country to have the 'LOWEST RATE of any country in the World.'
The comments come after a strong August jobs report showed employers added 162,000 jobs, nearly triple the 56,000 jobs economists had forecast. The unemployment rate remained at 4.1%. Despite the positive economic news, mortgage rates and the 10-year Treasury yield showed little reaction.
Trump tied his call for lower interest rates to trade deficits, writing 'LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.' This move would have significant implications, as the US runs trade deficits with dozens of countries, including many of its largest trading partners.
The Fed's current stance is hawkish, with Chair Kevin Warsh arguing that inflation remains stubbornly high. The implied probability of a 25-basis-point rate hike at the Fed's September meeting rose to 58.4% after Warsh's comments, up from 35.4% a day earlier.