US President Donald Trump urged Fed Chairman Jerome Powell to lower interest rates ‘right now’.
In his strong statement, Trump insinuated that the best time to cut interest rates is now, even claiming that the decision to maintain high rates only burdens the country’s economy and insinuating that even elementary school students can understand that.
Behind the insistence, Trump has his own reasons.
With the national debt reaching around $39 trillion, high interest rates increase the cost of repayment.
The rate cut is seen as being able to stimulate economic growth, revive the housing sector, and give a boost to the stock and crypto markets by increasing liquidity.
However, the Fed’s stance remains cautious.
Despite the increasing political pressure, the market expects almost no change in interest rates in the near future.
This is because external factors such as the conflict between the United States and Iran have pushed oil prices higher, thus increasing the risk of inflation.
When oil costs rise, the effect spreads throughout the economy, from transportation to food prices.
In this situation, lowering interest rates too early could worsen inflation, something the Fed is trying to avoid.
Currently, US inflation is still around 2.4%, but upward pressure is expected to increase.
Thus, the Fed is seen as more comfortable ‘playing it safe’ by waiting for economic developments before making any major moves.
