Don't Count on Lower Rates, Says Trump's Economic Advisor Amid Heated Trade and Monetary Policy Debate
Economic advisor to Trump: Maintains Respect for Fed's Autonomy
In a recent interview with Fox News, Kevin Hassett, White House's economic advisor, echoed the Fed's independence in setting interest rates. Despite President Trump's persistent calls for rate cuts, Hassett reiterated that the decision remains with the Federal Reserve.
The trade landscape has been volatile lately, fueled by Trump's imposition of special tariffs on various countries. Yet, Hassett ensured that these tariffs weren't orchestrated as a manipulative move to coerce the Fed into reducing interest rates.
Trump expressed his views on Truth Social, suggesting a case for monetary easing to Federal Reserve Chair Jerome Powell. Asserting that "now is the perfect time" for such action, the President's digital echo mirrors his frequent offline comments about the Fed's slow pace.
Last week, a stock market slump ensued following Trump's tariff announcements. Yet, Hassett clarified that there would be no political pressure on the Federal Reserve as they maneuver through the monetary policy waters.
On Friday, Fed Chair Powell hinted at a cautious approach, stating that it was premature to determine the future direction of monetary policy. Amidst the uncertainty, it's expected that the forthcoming tariff increase will surpass estimations, potentially leading to higher inflation and slowed growth.
According to ntv.de and RTS, the current FOMC stance suggests continued support for economic growth, albeit with a tinge of inflationary concerns. The target fed funds rate stays within the range of 4-1/4 to 4-1/2 percent as the Fed aims to balance solid economic expansion, low unemployment, and inflation control[1].
While the FOMC statement remains neutral on external factors, historical evidence suggests that tariffs can influence monetary policy, primarily through their impact on inflation and economic activity[2]. However, the current status quo emphasizes maximum employment and 2% inflation target without direct reference to tariffs or political pressures.
- In response to President Trump's suggestion of monetary easing on Truth Social, Kevin Hassett, the White House's economic advisor, has clarified that there will be no political pressure on the Federal Reserve to alter its employment policy or change the target fed funds rate, which currently ranges from 4-1/4 to 4-1/2 percent.
- Amidst the ongoing debate about trade and monetary policy, some economists argue that special tariffs imposed by President Trump could potentially influence monetary policy, primarily by affecting inflation and economic activity, thus indirectly impacting the employment policy.
- Contrary to President Trump's calls for rate cuts, Kevin Hassett has suggested that the White House respects the independence of the Federal Reserve in setting its employment policy and interest rates, including the employment policy with regard to tariffs, particularly as the FOMC's current stance emphasizes maximum employment and a 2% inflation target.
