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The president demanded the central bank cut rates after the hot August jobs report.
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Strong numbers reflect the US has “better credit,” Trump said, Markets see higher odds of a hike.
Donald Trump is once again turning up the heat on the Federal Reserve.
The president fired off a fresh request for the central bank to lower interest rates in a post on Truth Social on Friday. This time, the catalyst was the blockbuster month the US job market had in August, with the economy adding 162,000 payrolls, crushing expectations for an increase of 53,000.
“Great jobs number just announced, breaking all estimates (except mine!) by double and triple – And you haven’t seen anything yet!” Trump wrote on his social media platform Friday morning.
Lower interest rates tends to be the opposite of what comes after a hot jobs report. The thinking is that a hot labor market shows the economy is strong, and could even feed into further inflation, forcing Fed officials to remain hawkish.
That’s also how the market is interpreting the data. The odds of a 25 basis point rate hike at this month’s FOMC meeting rose on Friday to about 60%.
For investors, the payroll number is a mixed bag. The good news is that the labor market remains resilient, supporting the idea that growth isn’t on the verge of slowing dramatically. The bad news is that it suggests the US economy could withstand higher interest rates.
Trump’s post puts his handpicked Fed chair, Kevin Warsh, in a tough position as he heads toward this month’s meeting. Warsh is now encountering the same pressure Trump heaped on his predecessor, Jerome Powell, and Warsh for his part has struck a hawkish tone that suggests he might disappoint the president when he delivers the next rate decision on September 16.
The president said the strong jobs figures reflected that the US was in a stronger credit position than it was “a short time ago.” The US lost its top-tier AAA credit rating last year when Moody’s trimmed its rating on the US debt, though the rating change was based on the US’s fiscal outlook and rising interest costs of the national debt, not the strength of the labor market.
“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT,” Trump said, adding that he believed the US should have the “LOWEST RATE out of any country in the World.”
Trump reignited the US’s trade war with Canada last month, slapping a 50% tariff on goods like alcohol and hockey equipment.
“The Fed Board, with its great new leader, must get smart – BE PATRIOTS for a change. High interest rates put the USA at a very unfair disadvantage, and I won’t allow that to happen!” he added.
Trump has long pressured the Fed to lower rates to boost affordability for Americans, though the central bank has resisted while inflation remains sticky.
Trump feuded with former Fed Chair Jerome Powell for years since his appointment by the president during his first term in 2018. He fired criticisms at the Fed boss and said he would try to fire Powell from his position. Powell ultimately stayed on until the end of his term as Fed Chair in May, and remains on the Fed’s Board of Governors.
Warsh has been relatively hawkish in recent remarks, reiterating the Fed’s commitment to bring inflation back down to 2% at the central bank’s Jackson Hole Symposium.
Annual inflation clocked in at 3.4% in July, with fresh inflation numbers due next week.
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