Facing Pressure From Trump, The Fed May Cut Interest Rates
The Federal Reserve may cut interest rates on Wednesday after coming under significant pressure from President Donald Trump. The decision could have a serious impact on the economy, which remains strong but shows worrying signs of recession
President Trump has piled criticism on the Fed and its chairman, Jerome Powell. Trump has claimed that the Fed is responsible for at least some of the American economy’s problems because of its decisions on interest rates. He has repeatedly tweeted that the Fed should cut rates.
Trump’s demands seem to have affected Powell, who is now widely expected to announce a rate cut. This is despite the Fed considering rate hikes twice this year – a move that most economists considered more prudent than a radical cut. A rate cut may be ill-advised, but Trump wants one.
And a cut could indeed be radical. Trump has called on the Fed to cut rates to below zero, thus lowering the cost o of borrowing, which the President believes in a major issue. Traditionally, central banks are reluctant to take such drastic measures.
The Trump administration has created problems for the Federal Reserve thanks in large part to its trade policies. The trade war with China hasn’t helped overall economic conditions and current indicators, like bond yields, show a downturn could be on the way. How the Fed acts this week could have a major impact.