Speaking before the World Economic Forum in Davos, Switzerland, President Donald Trump announced that he will call for interest rates to be lower than current levels, potentially setting up a battle with the Federal Reserve. The Federal Reserve is set to announce its next interest rate move on Wednesday, which could prompt a reaction from President Trump, who recently called for the Fed to lower interest rates.
The Federal Reserve is expected to leave the target for the benchmark federal funds rate unchanged at a range of 4.25% to 4.5%, which would be the central bank’s first pause in this rate-cutting cycle. Inflation has persisted in the economy despite easing considerably from the 40-year high of 9.1% annual inflation recorded in June 2022. The most recent reading of the consumer price index (CPI) came in at 2.9%, above the Fed’s 2% target rate.
President Trump has criticized the Federal Reserve’s policies, including its decision to pause interest rate cuts, and has threatened to fire Fed Chair Jerome Powell. Trump has also advocated for lower interest rates, citing a decrease in oil prices as justification.
According to the CME FedWatch tool, the probability of the Fed holding rates steady for its next meeting in March is 68% as of Tuesday afternoon. Bank of America Global Research expects Fed Chair Jerome Powell to focus on the potential impact of Trump’s policies, including tax cuts and federal spending, on the economy in his post-meeting press conference.
