Trump's Rate Threat May Boost Warsh's Credibility
US President Donald Trump's recent threat to the Federal Reserve has been met with confusion and skepticism, but it may actually be an opportunity for Fed Chair Kevin Warsh to distance himself from the White House. In a tweet, Trump called on the Fed to lower interest rates to make the US more competitive with other countries.
The problem is that this argument makes no sense, even to those who support the president. Most economists agree that low interest rates are not necessary for a strong economy, and would actually have inflationary implications.
Warsh has struggled to establish his credibility since taking office in May, but he may be able to change that with a rate hike this month. A quarter-point increase could help reassert the Fed's commitment to its inflation target and show that it is not being cowed by the White House.