Trump's Latest Interest Rate Threat May Be a Gift to Fed Chairman Warsh
US President Donald Trump's recent comments on interest rates have left many puzzled. Despite strong August jobs numbers, which were triple the forecasts, and revisions to previous data, Trump turned his attention to the Federal Reserve (Fed) and its Chairman Kevin Warsh.
Trump wrote on his Truth Social site that high interest rates put the US at a 'very unfair disadvantage' and threatened to halt trade with countries in deficit if the Fed didn't lower rates. However, this argument has been met with skepticism as it doesn't make sense and contradicts economic principles.
Economists argue that low interest rates are not suitable for a fast-growing economy like the US, which would typically lead to higher inflation. With core inflation above 2% for 65 straight months, growth quickening, and financial conditions loose, many believe the Fed should not be cutting rates now.
TS Lombard economist Dario Perkins noted that a rate hike this month could help boost Warsh's credibility and distance him from the White House. A quarter-point hike would 'kill this credibility narrative' and end months of speculation about whether Warsh is under Trump's control.