- Donald Trump pushes for 1% rate as Fed resists.
- Such a move is unprecedented.
- Economists warn of potential market turmoil.
Former President Donald Trump has called for the Federal Reserve to cut interest rates to 1%, saying it would save a trillion dollars annually, intensifying discussions on economic policy.
Economists warn Trump’s proposed rate cut could destabilize markets and prompt asset bubbles, influencing risk assets like cryptocurrencies and testing the Federal Reserve’s inflation control strategies.
Donald Trump has proposed a Federal Reserve interest rate cut to 1%, emphasizing the need for economic stimulus. This proposal contrasts sharply with the current federal funds rate of 4.25% to 4.50%, reflecting a significant policy shift.
“Consumer Prices LOW. Bring down the Fed Rate, NOW!!!” — Donald Trump, Former President of the United States
Trump, a former president and current presidential candidate, advocated for the rate cut through public speeches and Truth Social posts. Jerome Powell, Federal Reserve Chair, opposes the proposal, citing inflation and economic uncertainty as concerns.
Financial experts caution that a sudden rate reduction would disrupt markets, leading to potential turmoil and renewed asset bubbles. A cut to 1% marks a drastic departure from normal policy and signals instability rather than recovery.
Such a rate cut could significantly impact traditional assets like U.S. Treasuries and stock indices. Risk assets, including cryptocurrencies, might benefit from increased liquidity but face risks of market instability and volatility.
Historically, a rate cut to near-zero occurred during major crises, such as in 2008 and 2020. Those moves led to strong rallies in both crypto assets and stocks, demonstrating the supportive role of expansive liquidity measures.
Experts question the feasibility of Trump’s proposal, warning of double-digit inflation if implemented. Analysts stress the importance of balancing liquidity conditions and macroeconomic stability when considering such monetary policy shifts.
