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Donald Trump has stepped up pressure on Federal Reserve chairman Jay Powell to reduce borrowing costs, setting up a possible clash between the two men less than a week before the US central bank meets to set interest rates.
During an appearance in the Oval Office on Thursday to sign several new executive orders, Trump said he knew prices “much better” than the Fed, and he would like to see them go down “a lot”.
The US central bank is expected to hold the benchmark rate between 4.25-4.5 percent next week, marking a break after three consecutive cuts since September.
I Fed he has signaled a slower rate of reduction this year and other officials are concerned that Trump's plan to raise prices, slash taxes and reduce immigration will hinder efforts to reduce inflation to 2 percent.
“The concerns (at the Fed) are not only about taxes, but also the realization that monetary policy will not help reduce inflation,” said Mahmood Pradhan, an economist at Amundi.
But the Fed's more cautious posture puts it on a collision course with the new US president.
Trump on Thursday he said he expected the Fed to listen to his demands and would talk to Powell “at the appropriate time”.
“I think I know the interest a lot better than they do, and I think I certainly know them a lot better than whoever is in charge to make that decision,” Trump said. “If I don't agree, I'll let you know.”
Trump promoted Powell to Fed chairman during his first term in office, but he has often criticized him, especially for not cutting rates fast enough in 2019. before his term expires in 2026.
“If the Fed continues to keep rates where they are and you think it's going to be good to get a rate hike, then there's a real chance of a recession,” said Douglas Holtz-Eakin, president of the American Action Forum. institutional rights policy center.
Some economists said that if Trump's policies raise rates it could force the Fed to hold back on further tapering or raise borrowing costs.
“If the administration does things that start to increase the rate of inflation, the Fed's mandate is very clear – they will raise rates. And they will get it on the neck (from Trump) if they do it,” said Mark Blyth, an economics professor at Brown University.
Trump used a speech to leaders in Davos earlier on Thursday that he wanted prices to fall “all over the world” – and told the Opec cartel that lower oil prices to make that happen.
He touched on the subject again in his Oval Office in a statement to reporters a few hours later.
“I would like to see oil prices come down, and when energy comes down, that will bring down inflation a lot. “That will automatically lower interest rates,” Trump said.
Also on Thursday he raised new doubts about Washington's commitment to NATO and called for additional defense spending by US allies in the agreement.
“They are not protecting us,” he said of NATO countries. “We protect them. So I don't think we should spend, I'm not sure we should spend anything, but we should definitely help them. But they should increase the 2 percent (of GDP on defense spending) to 5 percent. “
Trump's Nato comments came a day after new secretary of state Marco Rubio “reaffirmed US commitment” to the group, according to a transcript of his conversation with alliance secretary general Mark Rutte.
Among other executive orders signed by Trump on Thursday were the creation of a national cryptocurrency and another to authorize 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 the truth” about the killings, Trump said. “A lot of people have been waiting for this for years, decades, and everything will be revealed.”