{"id":17602,"date":"2026-09-16T09:06:04","date_gmt":"2026-09-16T01:06:04","guid":{"rendered":"https:\/\/tingchao.xyz\/?p=17602"},"modified":"2026-09-16T09:06:20","modified_gmt":"2026-09-16T01:06:20","slug":"trump-and-the-federal-reserve-are-on-a-collision-course-over-interest-rates","status":"publish","type":"post","link":"https:\/\/tingchao.xyz\/?p=17602","title":{"rendered":"Trump and the Federal Reserve are on a collision course over interest rates"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

President Donald Trump berated Jerome Powell for years as he sought to pressure the then-Federal Reserve chairman to cut interest rates. So far, he\u2019s given a pass to the new Fed chief, Kevin Warsh, whom Trump nominated earlier this year.<\/p>\n\n\n\n

Now, not even four months into Warsh\u2019s tenure, the honeymoon might be over. The president has ratcheted up his calls for an interest rate cut in recent weeks, setting the stage for a potential showdown after Wednesday\u2019s decision from Fed policymakers.<\/p>\n\n\n\n

Warsh faces a \u201ctime to choose,\u201d as economists at UBS put it: Will the Fed hold its key rate steady yet again in the face of rising inflation, or will the central bank increase the rate to battle stubbornly high prices \u2014 and potentially enrage the president?<\/p>\n\n\n\n

Trump adviser Kevin Hassett, chair of the National Economic Council, said he thinks the \u201cpresident will have something to say about it\u201d if the Fed makes a \u201cbig move\u201d with rates. (Hassett was a candidate for the Fed job before Trump picked Warsh.)<\/p>\n\n\n\n

\u201cThe president will have an opinion about it,\u201d Hassett told CNBC on Friday. \u201cI\u2019m sure he believes that there\u2019s plenty of room for interest rates to go down, and he voices that opinion while respecting the independence of the Fed.\u201d<\/p>\n\n\n\n

The Fed has not raised interest rates since 2023, when Joe Biden was president and the economy was contending with sky-high inflation. But market odds for an interest rate increase Wednesday were at more than 90% as of Tuesday, after inflation data for August came in hot at a 3.4% annual clip. The Fed\u2019s target for inflation is 2%.<\/p>\n\n\n\n

\u2018Just do your own thing\u2019<\/strong><\/p>\n\n\n\n

\u201cDon\u2019t look at me, don\u2019t look at anybody, just do your own thing and do a great job,\u201d Trump said at the time. This was a stark contrast with the insults Trump hurled at Powell, whom the president nominated to be Fed chair during his first term.<\/p>\n\n\n\n

Trump hasn\u2019t insulted Warsh, but he has become more vocal about his desire for a rate cut, once again raising questions about the Fed\u2019s independence.<\/p>\n\n\n\n

\u201cI\u2019d love to see lower interest rates,\u201d Trump said in a July 29 White House event. Trump said Warsh was \u201cfantastic,\u201d but claimed the Fed\u2019s board was \u201cpolitical\u201d and \u201cthey want to keep rates up.\u201d Trump again brought up rates in August, saying: \u201cWe would really like to see interest rates come down.\u201d<\/p>\n\n\n\n

Earlier this month, Trump went even further. \u201cWe should be paying the lowest interest rate in the world,\u201d Trump said on Sept. 4, following the consumer price index report that showed inflation wasn\u2019t slowing down. Trump complained that higher rates cost the country more on its debt. \u201cWe should be at 1% or a half a percent,\u201d he said. \u201cWe shouldn\u2019t be at 4%.\u201d<\/p>\n\n\n\n

Trump continued later in a social media post, \u201cA STRONG COUNTRY MEANS A LOWER INTEREST RATE.\u201d The social media post ended: \u201cHigh interest rates put the U.S.A. at a very unfair disadvantage, and I won\u2019t allow that to happen!\u201d<\/p>\n\n\n\n

The inflation situation<\/strong><\/p>\n\n\n\n

There are several factors stoking inflation.<\/p>\n\n\n\n

Deutsche Bank analysts noted that \u201cforward-looking elements of the inflation picture\u201d have gotten worse. \u201cRecent minutes to FOMC meetings showed the Committee is focused on three forces in particular \u2014 energy, tariffs \/ supply chains, and AI. At least two out of three of these factors points to more elevated inflation pressures\u201d than the Fed faced at its July rate-setting meeting, they wrote.<\/p>\n\n\n\n

Since then, the Trump administration entered a potentially protracted trade war with Canada, which was America\u2019s second-largest source of imports last year. Energy prices have soared back to near all-time highs. On Tuesday, U.S. crude oil touched $106 per barrel and international Brent crude oil traded around $109 per barrel. Gasoline prices remain 45% higher than February, when the war with Iran started. Diesel prices have reached their highest level ever, putting pressure on farmers and truckers who rely on the fuel.<\/p>\n\n\n\n

\u201cThe cost of diesel gets into just about everything,\u201d KPMG chief economist Diane Swonk recently told NBC News.<\/p>\n\n\n\n

The expansive AI data center buildout has fueled economic growth while also pushing some supply chains to their breaking point. In Friday\u2019s inflation reading, data showed the price of computer software, accessories and related items rising 25.4% over the last year \u2014 the category\u2019s largest increase on record. Consumer technology companies from Apple to Xbox to Amazon have raised some prices as a result.<\/p>\n\n\n\n

A rate hike carries risks of its own, according to economists, including Moody\u2019s Mark Zandi. The labor market, for one, is solid, if not spectacular. The unemployment rate is 4.1%, according to August jobs data released earlier this month.<\/p>\n\n\n\n

While inflation is high, the effects of Trump\u2019s tariffs and energy shocks from the Iran and Ukraine wars should fade without any help, Zandi wrote on LinkedIn. So, given the current economic circumstances, if the central bank hikes, \u201cit must push growth below potential, and that is hard to do without layoffs, rising unemployment, and igniting a self-reinforcing negative cycle,\u201d he added.<\/p>\n\n\n\n

Tech companies are shelling out hundreds of billions of dollars to buy equipment, build massive data centers and hire developers to support their AI ambitions, while corporations have reaped major profits. The average American, though, has seen wage growth slow to an annual rate of 3.1%, lagging the pace of inflation.<\/p>\n\n\n\n

\u201cThe challenge is even more complicated because AI-related investment appears to be powering the economy, while the non-AI economy is already struggling,\u201d Zandi said.<\/p>\n","protected":false},"excerpt":{"rendered":"

President Donald Trump berated Jerome Powell for years as he sought to pressure the then-Federal Reserve chairman to cut interest rates. So far, he\u2019s given a pass to the new Fed chief, Kevin Warsh, whom Trump nominated earlier this year. Now, not even four months into Warsh\u2019s tenure, the honeymoon might be over. The president […]<\/p>\n","protected":false},"author":8,"featured_media":17603,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[5],"tags":[2073,1754,1724],"class_list":["post-17602","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-international","tag-fed","tag-president","tag-trump"],"yoast_head":"\nTrump and the Federal Reserve are on a collision course over interest rates - LISTEN WORLD<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tingchao.xyz\/?p=17602\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Trump and the Federal Reserve are on a collision course over interest rates - LISTEN WORLD\" \/>\n<meta property=\"og:description\" content=\"President Donald Trump berated Jerome Powell for years as he sought to pressure the then-Federal Reserve chairman to cut interest rates. 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