Analysts say Trump’s call for a 1% Fed rate is unrealistic and could destabilize markets
Select a version of the text written from a presumed ideological perspective. This is not the original text, but a hypothetical version — how someone with that viewpoint might have phrased it. Tapping the current version again will return to the original or select cleaned version.
Economists warn that President Trump’s demand for a 1% policy rate would likely cause financial dislocation and raise Treasury borrowing costs, while the White House and Fed have not commented on the request.
President Donald Trump has repeatedly urged the Federal Reserve to cut its policy rate to 1%, a level far below the current 3.75%-4% range, prompting analysts to warn of severe market disruption. J. Benson Durham, founder of DASM investment research, said a three-percentage-point cut would be "cataclysmic" and could push Treasury yields higher as investors price in higher inflation, while the dollar would likely fall.
Critics close to the president suggest the demand is more about deflecting from rising consumer prices ahead of the November midterm elections than a viable monetary policy prescription. Grover Norquist, head of Americans for Tax Reform, said Trump is signaling his dislike of the “pain” of higher rates but should not blame the Fed for the hikes.
A White House liaison familiar with Fed Chair Kevin Warsh described the 1% target as unrealistic given global bond-market dynamics, warning that “if you mess up the bond market, it’s good for the bond investor and no one else.” The White House and the Federal Reserve declined to comment on the president’s remarks.
Trump’s pressure extends beyond rate cuts; he has called for the removal of Governor Lisa Cook and is awaiting the outcome of an inspector-general probe into former Chair Jerome Powell’s oversight of a Fed construction project. Analysts note that the Fed remains a convenient scapegoat as mortgage rates approach 7% and prices for staples rise, highlighting affordability concerns ahead of the election.
While Trump has previously used harsh language toward former Chair Powell, his recent comments about Warsh have been less confrontational, describing the new chair as constrained by a “political” board. Warsh, who has emphasized a commitment to price stability, has not discussed any conversations with the president.
Polls indicate that cost-of-living issues are influencing voter sentiment, with a recent Reuters/IPSOS survey showing only 17% approval of Trump’s handling of inflation, a top issue for many voters in the upcoming election.