Speaking with reporters Sunday in Ireland, President Trump argued the United States is strong enough that it "should be paying the lowest interest rate in the world, regardless of their formulas." Asked whether he expects a move from the central bank at next week's meeting, he replied, "I don't know." He made the comments while attending the Irish Open.
Kevin Warsh, Trump's handpicked Federal Reserve chair, is facing fresh pressure to tighten policy. Consumer prices in August rose more than economists expected, a result the central bank may view as pushing it toward what would be the first hike in rates in three years. Trump repeatedly criticized former Fed chief Jerome Powell for not cutting rates more aggressively. Warsh has not absorbed the same public heat since taking the top job, but in recent weeks Trump has signaled continued frustration with the Fed's stance.
Friday's inflation report topped forecasts, prompting traders to lift the odds of a September rate increase to 86% and to factor in two hikes by year end. The backdrop is complicated. The U.S. economy is contending with elevated energy costs as the U.S. war on Iran enters its seventh month, and the administration's tariff policies have further muddied the Fed's path to its inflation target.
Even as he complains about the Fed, Trump has suggested Warsh is constrained by what he has called a "very political" board of governors. Earlier in September, he suggested the U.S. might halt commerce with specific deficit-running economies unless the central bank reduced borrowing costs, though how that would bring rates down remained unclear.
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On Sunday he added, "I know more about formulas than anybody, and with the best credit in the world, we make other countries rich. We could turn that off in two minutes." Pressed on whether he would actually do it, he said, "Yeah, I'm going to do that with some nations," adding, "It will take place over a period of time." Polling shows voters rate Trump negatively on the war and on his stewardship of the economy, and concerns about the cost of living - from energy and housing to healthcare and groceries - are front and center heading into November's midterms that could threaten Republicans' control of Congress. For household budgets, the key variables to watch are the inflation trend, how the Fed interprets it, and what that means for everything from monthly bills to savings rates.
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