US President Donald Trump has again pressured the Federal Reserve to cut interest rates immediately, saying at a White House meeting that they should have a “special meeting” to reduce rates.
“What’s a better time to cut interest rates than now? A third-grade student would know that,” Trump added, according to videos shared on X.
Trump has reiterated his calls for lower rates after stating on Truth Social on Thursday that the Federal Reserve chair “should be dropping interest rates, IMMEDIATELY.”
The president argued in January that the US should have “substantially lower” rates and “the lowest in the world,” labelling Powell “too late” and claiming he is “hurting our country, and its National Security” by maintaining high interest rate levels.
Trump has advocated for lower rates to reduce the cost of servicing the massive $39 trillion US national debt and stimulate economic growth, housing, and the stock market.
Lower rates can also push investors towards higher-risk assets like stocks and crypto. Cheaper borrowing costs also fuel broader market liquidity, meaning more money flows into speculative assets.
No rate changes likely at Fed’s Wednesday meeting
The US central bank kicks off its two-day March meeting on Tuesday and is slated to announce its rate decision on Wednesday.
However, CME futures markets paint a different picture, currently indicating a 99% probability that rates will remain unchanged in the 3.50% to 3.75% this week.
The outcome for the April 29 meeting is similar with a 97% probability of no change.
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This is despite the expectation that Trump’s pick for Fed chair replacement, Kevin Warsh, who will take the helm in mid-May when Powell’s term ends, may be more open to cutting rates.
The war with Iran has also caused a surge in oil prices, which means higher fuel costs and is likely to push up food and other goods prices via higher transport costs, leading to higher inflation, potentially prompting the Fed to raise rates.
The current rate of inflation in the US remained steady at 2.4% in February, but it is expected to rise in March, according to Trading Economics.
US interest rates have remained unchanged since December. Source: TradingEconomics
Fed will play the waiting game
With the US-Iran conflict’s impact on rising oil prices, “traders have already priced in the likelihood of zero cuts this year,” Jeff Mei, chief operations officer at the BTSE exchange, told Cointelegraph.
This should mean that there will be “less downward pressure on crypto asset prices,” because oil’s impact on inflation is “unclear at this point,” and the Fed will likely “continue to wait out the situation.”
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