In a new escalation of the economic debate in the United States, former US President and Republican presidential candidate Donald Trump issued a direct and explicit call to Federal Reserve Chairman Jerome Powell to implement a "substantial" and immediate interest rate cut. This call comes at a sensitive time, as Trump seeks to highlight his economic vision, praising the economic performance during his administration and contrasting it with the current situation.
Call for investment and growth
In his remarks, Trump asserted that the US economy possesses tremendous potential for growth, noting that the private sector is expanding at a rate exceeding 5%, which he attributed to a massive influx of business investments, the largest in history. Trump stated, "All smart investors know that the most prosperous economy in the world is the United States economy, and therefore, now is the time to invest here." He emphasized that the current environment necessitates a flexible monetary policy that supports this momentum rather than stifling it with high interest rates.
Industrialization boom and family income
In a post on his platform, Truth Social, Trump focused on the gains made by the manufacturing sector, asserting that his administration had witnessed a true renaissance in this vital field, coinciding with a significant rise in American household income. He explained that these combined factors had bolstered GDP growth to levels unseen in decades, making the preservation of these gains a top priority requiring intervention from the Federal Reserve.
Inflation and the title of "Mr. Definitions"
Trump didn't miss the opportunity to comment on the latest inflation data, describing it as "fantastic and low," which he considers conclusive proof that the justifications for monetary tightening have disappeared. He criticized what he called Jerome Powell's "great delay" in deciding to cut interest rates, and praised himself as "Mr. Tariffs," referring to his protectionist policies that he believes have protected domestic industry.
Context of the relationship between the presidency and the federal government
Trump's remarks have sparked widespread debate about the independence of the Federal Reserve, an institution designed to operate free from direct political pressure to ensure price stability and employment. Historically, the relationship between Trump and Powell has been marked by frequent tensions, with Trump favoring low interest rates to stimulate markets and rapid growth, while the Fed typically focuses on purely economic indicators to curb inflation, even if this leads to a temporary slowdown.
Expected economic impact
Any decision to lower US interest rates has far-reaching effects, extending beyond the US itself to the global economy. Lower interest rates reduce borrowing costs for businesses and individuals, encouraging expansion and spending, but they can also put pressure on the dollar's value. For emerging markets, lower US interest rates are generally considered good news, as they reduce capital flight to the US in search of higher returns, thus stabilizing local currencies and the global economy.
