Trump's Low-Rate Plan Hits Inflation Roadblock

Donald Trump has been pushing for lower interest rates to boost economic growth in the US. He believes that lower rates could help businesses borrow at cheaper costs, leading to increased hiring and investment. However, inflation is a major obstacle to his plan.

The Federal Reserve has not cut interest rates as quickly as Trump would like. The Fed's target rate stands at 3.50%-3.75%, but Trump wants it to be even lower, ideally around 1%. He argues that if the Fed cuts rates sharply, the US could see GDP growth of 14%, 15%, 16% or even 20%.

However, the Fed cannot simply slash interest rates if inflation remains high. Lower rates generally encourage more borrowing and spending, which can add pressure to prices. The 'Trumpflation' and AI boom are making the Fed's job harder.

The Iran war has created an even bigger inflation problem. After Trump approved military operations against Iran, Iran closed the Strait of Hormuz to most commercial maritime traffic. This disrupted the daily movement of about one-fifth of the world's petroleum liquids.