Speaking before the World Economic Forum in Davos, Switzerland, President Donald Trump said he will call for interest rates to be lower than current levels, a potential sign he is 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 Trump, who recently called for the Fed to lower interest rates. The Federal Open Market Committee (FOMC) is expected to leave the target for the benchmark federal funds rate unchanged at a range of 4.25% to 4.5%. Inflation has persisted in the economy, with the most recent reading of the consumer price index (CPI) at 2.9%, above the Fed’s 2% target rate.
Trump has criticized the central bank’s policies under Chairman Jerome Powell, whom he nominated to the role in 2017. Trump has said he plans to bring down the price of oil and energy prices to address inflation, which he believes should prompt the Fed to cut interest rates. He has also threatened to fire Powell but has since walked back on the threat.
The potential impact of Trump’s economic policies, including his plans for tax cuts and federal spending as well as tariffs on imports, will likely feature prominently in Powell’s press conference on Wednesday. The Fed has cited uncertainty about the economic impact of potential changes in trade and immigration policy, suggesting that the process of slowing inflation back to its 2% target “could take longer than previously anticipated.”
The probability of the Fed holding rates steady for its next meeting in March is 68%, according to the CME FedWatch tool.