Trump Fed rate cuts push targets Warsh’s next move
Trump said rates should fall and suggested Fed Chair Kevin Warsh agrees, days before a closely watched policy decision.
By Sal Moretti · Money Reporter
3 min read
President Donald Trump put his Fed rate cuts demand back at center stage Monday, telling reporters that interest rates “should be lowered” as the Federal Reserve heads into a policy meeting that has Wall Street unusually unsure of the outcome.
Trump made the comments while traveling to an event in Michigan, according to MarketWatch. Asked about new Fed Chair Kevin Warsh, the president said, “I know what he wants to do,” and added that Warsh “wants to do the right thing.”
The president also suggested Warsh may not have a free hand inside the central bank. Trump said the Fed chair needs support from colleagues and claimed some of them may have “bad intentions,” MarketWatch reported.
The remarks landed just before the Fed’s two-day meeting, which is scheduled to wrap Wednesday with a policy announcement and a press conference. MarketWatch reported that traders see a roughly one-in-three chance of an interest-rate increase at the meeting, a level of uncertainty around a Fed decision that the outlet described as the highest in years.
What did Trump say about Fed rate cuts?
Trump said he believes rates should come down and indicated he thinks Warsh shares that view, according to MarketWatch. The president framed the issue as a fight inside the Fed, saying Warsh may be constrained by other members of the board.
Warsh has not made it easy for investors to read his plans. Gregory Daco, chief economist at EY-Parthenon, wrote on LinkedIn that the July meeting is “unusually enigmatic” because Warsh has offered little clear guidance.
Daco said Warsh has spoken often over the past six weeks, including during his first semiannual testimony to Congress, but has revealed little about what he wants to do next on rates.
Even a standard procedural detail drew extra attention. MarketWatch reported that the Fed’s announcement of Warsh’s usual postdecision press conference became news because such briefings had been questioned as Warsh considered changes to how the central bank communicates.
Why are investors struggling to read Warsh?
One clear theme from Warsh has been support for the Fed’s 2% inflation target, according to MarketWatch. That stance has led some observers to view him as tougher on inflation.
Ethan Harris, a former chief economist at BofA Securities, wrote on LinkedIn that Warsh’s public loyalty to the 2% target appears to have persuaded business media that he is an inflation hawk. Harris said he agrees with Trump, however, that Warsh wants lower interest rates.
Harris said Warsh believes artificial intelligence will raise productivity, which could help keep inflation under control and allow rates to fall. In Harris’s view, that points to a lower path for rates than the one favored by some of Warsh’s colleagues.
The Fed’s Wednesday decision will show whether Warsh’s quiet approach ends with a move, a pause or a surprise. For now, Trump is making his preferred outcome plain, and traders are bracing for a meeting with more suspense than usual.
This story draws on original reporting from MarketWatch.