Trump administration urges Federal Reserve to hold rates steady ahead of policy meeting
President Trump and senior officials have publicly pressed Federal Reserve Chair Kevin Warsh to avoid raising interest rates before the September meeting, warning of trade consequences and citing low inflation readings.
The White House and senior economic advisers have intensified public pressure on the Federal Reserve to keep interest rates unchanged ahead of the September 15-16 policy meeting. President Donald Trump, Vice President J.D. Vance, Treasury Secretary Scott Bessent and senior economic counselor Peter Navarro all urged the Fed to refrain from a hike, with Trump threatening to halt trade with countries that maintain large U.S. trade surpluses unless rates are cut.
"We believe that the Fed should be lowering interest rates," Vice President Vance said, adding that the administration was taking steps to keep rates down and would welcome additional support from the central bank.
"The Fed typically doesn't raise rates during a supply shock until there are second- or third-order inflationary effects," Treasury Secretary Bessent told CNBC.
Navarro, speaking on a program hosted by former adviser Steve Bannon, called a rate increase "careless" and said it would hurt the sectors most critical to American prosperity. He referred to members of the Federal Open Market Committee as "clowns" and suggested that Chair Warsh was trying to "do the right thing."
The administration’s campaign comes as market expectations for a rate hike sit at roughly 60%, buoyed by a strong jobs report. The Fed’s preferred inflation gauge, the core PCE price index, is running just above 3% on a three-month annualized basis, while the headline CPI shows a 1.6% annualized rate. Some Fed officials have warned that inflation has remained above the 2% target for several years.
Chair Warsh has maintained that the Fed’s decisions are independent, citing congressional testimony in which he noted that the Fed had kept rates steady despite political pressure. He also acknowledged that elected officials have a right to comment on monetary policy.
The current push mirrors earlier attempts by Trump-era officials, including Vice President Mike Pence and Treasury Secretary Steve Mnuchin, to influence Fed policy during the first term. At that time, the Fed eventually cut rates two months after the pressure was applied.
Economists note that the administration’s stance challenges the conventional view that rapid economic growth can generate inflation, a relationship described by the Phillips Curve. Recent wage data show modest increases, with average hourly earnings up 0.3% in August and 3.1% year-over-year, while unemployment held at 4.1%.