Trump claims next Fed chair will favor lower rates ‘by a lot’
US President Donald Trump stated on Wednesday that the next chairman of the US Federal Reserve will be an individual who supports significantly lower interest rates. “I’ll soon announce our next chairman of the Federal Reserve, someone who believes in lower interest rates, by a lot, and mortgage payments will be coming down even further,” Trump said. During a national address, Trump highlighted his economic and national security achievements from the first year of his second term in office. He has previously stated that he will reveal his selected successor to current Fed Chair Jerome Powell early next year.
All of the known finalists—White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Chris Waller—advocate for interest rates to be lower than they are now. None, however, has explicitly stated that they would urge the US central bank to reduce rates to the levels demanded by Trump, which in some instances could fall to a crisis-level 1 percent. The current Fed rate is set between 3.5 percent and 3.75 percent, and even his most recent appointee, Governor Stephen Miran, does not support a rate approaching that low.
Trump has consistently voiced a wish for reduced mortgage rates; however, the interest rate managed by the Fed has a limited impact on the costs associated with longer-term borrowing. Those are more commonly affected by longer-term rates that the Fed has less control over, such as the yield on the 10-year Treasury note. The rate is influenced by investors’ expectations regarding US economic growth and inflation, and overall, it has seen minimal change over the past year. Mortgage rates have remained in the 6.3 per cent-6.4 per cent range since Labor Day, displaying minimal signs of decreasing.
Trump informed that he was inclined to choose either Warsh or Hassett as the next leader of the US central bank. Interviews persisted on Wednesday, featuring a discussion with Waller, who has been an early proponent among current Fed policymakers for reduced rates while steadfastly upholding the independence of the Fed. Trump expressed that the next Fed chair ought to seek his counsel regarding the appropriate setting of interest rates. Presidents generally delegate the responsibility of rate decision-making to the Fed. “Typically, that practice is no longer observed.” It was once a common practice. “It should be done,” Trump said. “It doesn’t mean – I don’t think he should do exactly what we say. But certainly we’re – I’m a smart voice and should be listened to.”
