Interest rates become the battleground between Donald Trump and the Federal Reserve

Donald Trump increases pressure on the Federal Reserve to cut interest rates, but experts warn the conflict could harm US economic stability

Donald Trump has increased pressure on Federal Reserve Chairman Jay Powell to reduce borrowing costs, creating a potential conflict between the two men less than a week before the central bank meets to set interest rates.

According to the Financial Times, during an Oval Office appearance on Thursday to sign several new executive orders, Trump said he understands interest rates “much better” than the Fed and would like to see them fall “a lot.”

The US central bank is expected to keep its benchmark rate at 4.25% to 4.5% next week, marking a break after three consecutive cuts since September.

The Fed has signaled a slower pace of cuts this year, with some officials worried that Trump’s plan to raise tariffs, cut taxes and crack down on immigration will hamper efforts to reduce inflation to 2%.

“The concerns [no Fed] these are not just about tariffs, but also about recognizing that fiscal policy will not help reduce inflation,” said Mahmood Pradhan, economist at Amundi.

But the Fed’s more cautious stance puts it on a collision course with the new US president.

Trump said Thursday that he hopes the Fed listens to his demands and that he will speak to Powell “at the right time.”

“I think I understand interest rates a lot better than they do, and certainly a lot better than the person who is primarily responsible for making this decision,” Trump said. “If I disagree, I will make that clear.”

Trump nominated Powell to chair the Fed during his first term but has frequently criticized him, especially for not cutting rates quickly enough in 2019. The president indicated during the campaign last year that he would not seek to remove Powell from the post before his term expires in 2026.

“If the Fed continues to keep rates where they are and they think it would be great to get a boost from lower rates, then there is a real chance of conflict,” said Douglas Holtz-Eakin, president of the American Action Forum, a policy think tank. center right.

Some economists have said that if Trump’s policies put pressure on prices, it could lead the Fed to avoid further cuts or even increase borrowing costs.

“If the government does things that actually start to increase the inflation rate, the Fed’s mandate is pretty clear — they will raise rates. And they will get scolded [de Trump] if they do,” said Mark Blyth, an economics professor at Brown University.

Trump used a speech to executives in Davos earlier on Thursday to say he wanted rates to fall “all over the world” — and called on the OPEC cartel to lower oil prices to make that happen.

He returned to the theme in his Oval Office comments to reporters a few hours later.

“I would like to see oil prices go down, and when energy goes down, that will eliminate a lot of the inflation. That will automatically make interest rates go down,” Trump said.

He also raised new doubts about Washington’s commitment to NATO and called for more defense spending by U.S. treaty allies.

“They are not protecting us,” he said of NATO countries. “We are the ones protecting them. So I don’t think we should spend, I’m not sure we should spend anything, but we should certainly help them. But they must increase their 2% [do PIB em gastos com defesa] to 5%.”

Trump’s comments about NATO came a day after newly sworn-in Secretary of State Marco Rubio “reaffirmed the U.S. commitment” to the group, according to a record of his conversation with the alliance’s secretary general, Mark Rutte.

Among the other executive orders signed by Trump on Thursday are one creating a national cryptocurrency stockpile and another authorizing the release of federal files on the assassinations of President John F. Kennedy, former Attorney General Robert F. Kennedy and civil rights leader Martin Luther King Jr.

“The American people deserve transparency and truth” about the killings, Trump said. “Many people have been waiting for this for years, decades, and everything will be revealed.”