President Donald Trump said on Thursday that he will demand a reduction in the U.S interest ratestrying the pressure Despite the longstanding rule of political independence at the Federal Reserve, the central bank.
In a virtual speech at the World Economic Forum in Davos, Switzerland, Trump called for a cut in interest rates after a group of nations known as OPEC, including Saudi Arabia, called for a cut in oil prices.
The prospect of low oil prices will allow the Fed to back off its fight inflation and lower interest rates, said Trump.
“I’m going to ask Saudi Arabia and OPEC to lower the cost of oil,” Trump said, then added, “As oil prices go down, I’m going to ask that interest rates go down immediately.”
The US is not part of OPEC, nor is the president involved in the organization’s decisions regarding the price of oil sold by its member states.
The central bank is usually insulated from political interference, but several past presidents have sought to influence the Fed’s interest rate policy, including Trump, who repeatedly advocated low interest rates during his first term.
On the campaign trail in August, Trump he said A US president should be tasked with setting interest rates.
Fed Chairman Jerome Powell hit defiant tone when asked in November if Trump would resign from his post if asked.
“No,” Powell told reporters gathered at a news conference in Washington, DC, blocks away from the White House.
Asked if Trump could fire or demote him, Powell replied, “The law doesn’t allow it.”
The prospect of a presidential role in setting interest rates drew opposition from both liberal and conservative economists he spoke before to ABC News.
Federal Reserve Chairman Jerome Powell speaks during a press conference after the Monetary Policy Committee meeting on December 18, 2024 in Washington.
Andrew Caballero-Reynolds/AFP via Getty Images
Critics of an expanded role for the president point to high inflation in the 1970s and 1980s. Before inflation took hold, President Richard Nixon asked Fed Chairman Arthur Burns to cut rates ahead of the 1972 presidential election.
Nixon’s proclamation is seen as a factor in the lower interest rates that allowed inflation to spiral out of control, some economists point out.
“Allowing the president, any president, to help set monetary policy would ultimately damage the U.S. economy,” Mark Zandi, chief economist at Moody’s Analytics, told ABC News.
Trump’s remarks on Thursday came amid months of interest rate cuts.
The Fed cut interest rates by a total of one percentage point in the final months of 2024, providing relief to borrowers who have been stuck in a long stretch of high interest rates.
The central bank, however, has indicated that it may cut rates less in 2025 than previously indicated. Bringing inflation under control may be more difficult than policymakers thought a few months ago, according to the bank.
The Fed will make its next decision on interest rates next week. The central bank expects to keep interest rates at the current level of between 4.25% and 4.5%, according to the institution. CME FedWatch toola measure of market sentiment.
Speaking on Thursday, Trump said lowering rates could lead to lower interest rates around the world.
“They should fall all over the world,” Trump said. “They should follow us.”
