Perspective of the interest rate: Trump may be in its own way, since it requires lower rates

• Trump has said that he wantsOwer’s interest rates, But it can be stopped in your own way.
• The president said he would demand that interest rates be reduced in the direction of Davos last week.
• His policiesHowever, they are an obstacle that the Fed could have to navigate, since it adjusts the monetary policy.

President Donald Trump has asked to lower interest rates, and increased his criticisms to the head of the Federal Reserve, Jerome Powell, after this week’s policy meeting.

But the president himself may be the greatest obstacle to the lowest loans costs, since his policies run the risk of exacerbating a problem that campaigned to solve, Prices for increase.

The president of the FED, Jerome Powell, sent a clear message this week that the central bankers were not in a hurry for lower rates, and Fed officials chose to stop the tariff cuts at the first policy meeting of the year.

That seemed to challenge Trump’s pressure, who said in his speech to the World Economic Forum last week that he would demand interest rates be lowered “immediately.”

“Because Jay Powell and the Fed could not stop the problem they created with inflation, I will unleash the production of American energy, cutting regulation, the rebalancing of international trade and the revival of American manufacturing.” Trump wrote about social truth After Wednesday’s rate.

He added that his policies, including plans to impose empinar duty In imports from China, Canada and Mexico, it could help renew the economy of the United States.

But those plans could end up being the same obstacle that the Fed has to navigate this year, since it decides what to do with interest rates, and they are probably the reason why the Fed will stop until the image becomes clearer, clearer, Wall Street forecasts say.

“The reality is that Fed is simply trying to respond to the data and policies of the new administration as they develop,” said the main strategist of the main asset management. “At times like these, when government policy, particularly tariff policy, is so uncertain, do not have a prognosis advantage. Maintaining policy rates on hold until a clear direction begins to emerge is sensible.”

Others point out that, despite Trump’s insistence that the rates decrease rapidly, the Fed can afford to take its time after cutting at a rapid pace in the final stretch of 2024.

“After reducing rates in 100bps last year, despite the fact that the economy was generally in good shape, the Fed can now be allowed to be patient while evaluating the economic impact of policy changes under the Trump administration,” Paul Honeyczzarski, Global Macro Chief. Global Brandywine strategy, he said. “Meanwhile, wide -based tariffs would have a significant impact on assets inflation at a time when inflation of the nucleus is still above 2%.”

Economists have warned that Trump’s plan to raise pronounced tariffs on US imports could envive inflation, a notion that Trump has backed away. The president has said that he would reduce prices and implement tariffs in his first mandate without a significant increase in inflation.

However, its rate plan this time is much broader, explaining why the forecasts are more concerned with a resurgence of inflation in their second mandate.

The Fed is also working with a strong economy, and the administration is making more pro growth plans. Lowering rates in a high growth economic scenario also runs the risk of stealing fresh inflationary pressures.

Bond yields In the weeks prior to the inauguration of Trump, a sign that investors were weighing the inflation risks linked to the president’s economic plans and anticipated higher interest rates.

Since then, the yields have been withdrawn, since the agenda in favor of Trump’s growth fueled more risk appetite, but Inflation expectations They are still awake. The expected inflation rate of one year has increased 40 basic points since October, according to Cleveland Fed data.

The market prospect for Fed rates cuts has also been attenuated. According to the CME Fedwatch tool, investors have a price at an 82% chance that the Fed maintain the level of rates in March, above 48% chance of a month ago.

Investors are also staging in a probability of 57%, the possibilities rates will remain unchanged until May, compared to 37% last month.

“Mr. Powell repeated the final result in several forms during his appearance. The food to carry was: the Fed is not in a hurry to further reduce the rates,” wrote David Morrison, senior market analyst of Trade Nation Market, in a note in a note .

The markets have questioned whether Trump, who has said that he understands the interest rates “much better” than the Fed, will try to influence the Central Bank in its future rate decisions.

According to the reports, Trump’s allies created the manifesto before the election to erode the Fed independence. Scott Besent, Trump’s choice to lead the United States treasure, also floated creating a “shadow fed chair” before the inauguration, although Trump has not recognized that possibility.