The president of the United States, Donald Trump, asked the Federal Reserve on Wednesday to lower the reference interest rate in at least three percentage pointsrenewing its call to the American central bank from lowering fees to help reduce the cost of the country’s debt service.
“Our Fed rate is at least three points too high. ‘Very late’ is costing the US US $ 360,000 million by point, per year, in refinancing costs. There is no inflation, companies come to America. ‘The most active country in the world!’ Lower the rate !!!, “Trump wrote in Truth Social.
Powell’s successor could have difficulty achieving the rate cuts that Trump wants
Attentive observers of the Federal Reserve have a message for anyone who thinks that the next leader of the US Central Bank will bring lower costs of indebtedness in the silver tray: they do not have it.
While it is an unlikely result, some investors have taken positions in the futures markets that will benefit if interest rates fall immediately after the end of the mandate of Jerome Powell as president in May 2026. The trade has been promoted by the promise of President Donald Trump to name “someone who wants to cut the rates.”
These investors have focused on futures contracts linked to the financing rate guaranteed to one day (Sof)which closely follows the reference rate of federal funds. They have sold contracts that expire before Powell’s departure and have pounced on contracts that expire just after the planned arrival of a president appointed by Trump.
It is an operation that implies the risk that Trump will come out with his, ignoring the way in which the central bank fixes the rates.
A president “cannot act as a dictator,” said Mark Gertler, professor of economy at the University of New York, co -author of articles with the former president of the Benanke Federal Reserve and former Vice President Richard Clarida. “He can’t call the Marines or anything similar.”
Gertler said that adjusting the rates requires the support of the majority of the Federal Open Market Committee. Nineteen responsible for monetary policy participate in FOMC meetings and twelve vote. In other words, the new president will have to convince his colleagues with reasonable arguments for the cut.
Among the candidates for the Federal Reserve are former Governor Kevin Warsh, Treasury Secretary Scott Besent and the director of the National Economic Council Kevin Hassett, Bloomberg reported. The current governor of the Federal Reserve, Christopher Waller, is also an option, and has also considered the candidacy of the former World Bank, David Malpass.
