The Donald Trump administration has increased pressure on the Federal Reserve to lower interest rates. President Trump has heavily criticized Jerome Powell, the former head of the Federal Reserve, in recent years and pressured him to reduce interest rates. However, Trump has not yet attacked the new Federal Reserve chair, Kevin Warsh, whom he appointed this year.
New Pressure on the Federal Reserve
Now, nine months after Warsh took office, Trump has once again called for a reduction in interest rates, and this move could lead to a confrontation between the President and the Federal Reserve. In recent weeks, Trump has created a new atmosphere for the Federal Reserve's decision-making with increased calls for lower interest rates. According to forecasts, the likelihood of an interest rate hike at the Federal Reserve's meeting on Wednesday is estimated to be over 90 percent.
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Economic Challenges and Inflation
The Federal Reserve must decide between maintaining interest rates and combating rising inflation. Reports indicate that inflation reached 3.4 percent in August, while the Federal Reserve's target is 2 percent. Trump has explicitly stated on several occasions that he wants lower interest rates to reduce the country's costs. At an event in the White House on July 29, he said, "I would like interest rates to be lower." He also stated in September, "We need to achieve the lowest interest rates in the world."
Analysts believe that various factors are contributing to rising inflation. For example, energy prices have surged, with U.S. crude oil reaching $106 per barrel. Gasoline prices have also risen by 45 percent compared to February, when the war with Iran began. Analysts at Deutsche Bank have noted that high inflation rates may be due to trade tensions and changes in the supply chain.
In this context, the risks of raising interest rates for the economy are present. Some economists, such as Mark Zandi from Moody's, have pointed out that economic growth may be affected and could lead to job losses and increased unemployment rates.
While technology companies are investing billions of dollars to build large data centers and hire developers, the average wage growth for ordinary individuals has reached 3.1 percent, lagging behind the inflation rate. This situation could create further challenges for the economy, as investments related to artificial intelligence contribute to economic growth, while other sectors of the economy are struggling.
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