The Zhitong Finance App noticed that after the Federal Reserve ignored its repeated calls to reduce borrowing costs and announced an interest rate hike of 25 basis points, US President Trump requested a reduction in interest rates.
In a social media post on Wednesday, Trump said the US interest rate “should be 1%, or less,” because “our country is booming with new investments” and has “the best credit in the world.”
“Lower interest rates for the United States of America, and quickly!” He wrote in a post.
The Federal Open Market Committee (FOMC) voted unanimously to raise the benchmark federal funds rate to a range of 3.75% to 4%. The move could strain the relationship between Trump and his hand-picked Federal Reserve Chairman Kevin Walsh.
Although the president's post did not name Walsh, his fire increased the pressure on the Federal Reserve chairman — during the swearing-in ceremony earlier this year, Trump also encouraged Walsh to be “completely independent.” Lowering interest rates to the level expected by Trump requires the Federal Reserve to cut interest rates drastically, and such a move usually only accompanies a serious economic crisis.
Trump continues to argue that interest rates have put the US at a competitive disadvantage compared to the rest of the world's economies, and linked this to America's trade deficit, saying, “We are 'carrying' almost every country in the world, and this can't go on.”
In the past, Trump has threatened to cut off trade with partners with trade surpluses unless the Federal Reserve cuts interest rates. It's unclear how fulfilling this threat will result in lower borrowing costs for Americans.
Wednesday's rate hike was the first since 2023, and the background was that policymakers lost confidence that inflation would cool down on its own. After recent data showed a higher-than-expected increase in consumer prices in the US in August, the market anticipated a rate hike by the Federal Reserve. The war between the US and Iran — now in its seventh month — is driving up energy prices, along with Trump's tariff policy, blurring the outlook for the Federal Reserve's inflation target.
Officials said in a statement after the meeting that inflation is still high, but they also described the economy in positive terms: productivity growth and capital investment are strong, and employment growth is in sync with the size of the workforce.
Walsh pointed out at his press conference that geopolitical risk is one of the drivers of inflation. He said, “Hot spots around the world are unavoidable. Our judgment on what is most likely to happen and what is least likely to happen in the geopolitical situation has changed.”
Walsh has vowed to defend the independence of the Federal Reserve, despite growing pressure from the president, who was frustrated by the worsening political climate in the Republican midterm elections. When it comes to Iran's war and the economy, voters gave Trump poor reviews, and high prices for health care, housing, energy, and groceries were top topics in the November election. Lower borrowing costs could help Trump and Republican lawmakers argue that an economic boost is imminent, thereby helping to limit electoral losses.
Trump has a tough attitude towards Walsh's predecessor and former chairman Jerome Powell, often criticizing him for not being more aggressive in cutting interest rates. He also pressured the Federal Reserve in other ways, including trying to fire Governor Lisa Cook, but the move has so far been blocked by the Supreme Court.