Analysts believe that US President Donald Trump has started putting pressure on the regulator. He announced that he would push for lower interest rates. Well, that is a twist!
Speaking at the World Economic Forum in Davos, Trump did not mention the Federal Reserve directly but made it clear that he wants rates to go down.
“I'll demand that interest rates drop immediately,” Trump said. “And, likewise, they should be dropping all over the world. Interest rates should follow us,” the president emphasized.
Experts see these comments as the first sign of pressure on Fed officials. Let us not forget that Trump has often criticized Jerome Powell, the head of the regulator who was appointed by Trump himself.
Markets reacted positively to Trump’s words. The Dow Jones Industrial Average started climbing, and the yield on politically sensitive 2-year Treasury bonds dipped slightly. The US dollar had the hardest time as it dropped to a low of 107.56 points. Later, the US dollar index was down 0.34%, trading at 107.77 points.
Speaking to reporters, Trump said he expected the Fed to be reasonable and believed they would listen to him. He also mentioned that he planned to have a conversation with Powell at the right time.
Powell and his colleagues have repeatedly stressed the importance of the Fed’s independence. The chairman has also made it clear that the central bank does not make decisions based on political pressure. It is worth noting that while Trump does not have legislative power over the Fed, he does have the authority to appoint members of its board of governors.
