US President’s Comments on Federal Reserve Chair Spark Concerns Over Economic Stability
An independent central bank is seen as the bedrock of a functional economy, with officials steering the economy by calibrating the benchmark interest rate on which bank loans and mortgages are based. However, US President Donald Trump’s repeated calls for Federal Reserve Chair Jerome Powell to cut interest rates have raised concerns over the potential impact on the economy.
According to a report by CNBC, Trump said on Friday that “if we had a Fed Chairman that understood what he was doing, interest rates would be coming down, too.” The White House also announced on Friday that officials are assessing whether they can remove the Fed chair. This is not the first time Trump has criticized Powell’s approach to US monetary policy.
The concerns over Trump’s comments were temporarily alleviated as markets in the US and Europe were on a break for the Good Friday holiday. However, the issue remains a pressing one, with many experts warning that an administration that aims to please the populace might cut rates despite high inflation, leading to further economic difficulties.
### Economic Implications of Trump’s Comments
Corporations and consumers generally prefer low interest rates, as the cost of borrowing is cheaper. However, such behavior can overheat the economy, causing prices to shoot up. As CNBC notes, “U.S. President Donald Trump’s repeated calls for Federal Reserve Chair Jerome Powell to cut interest rates might make businesses and people happy — at the cost of letting inflation run rampant again.”
The issue is further complicated by Trump’s tariffs, which are taxes on imports and hence fundamentally price increases. This could lead to inflation getting two shots in the arm, according to CNBC. As the publication notes, “Factor in Trump’s tariffs, which are taxes on imports and hence fundamentally price increases, and inflation could be getting two shots in the arm.”
### Growing Disapproval of Trump’s Economic Handling
A CNBC survey of 1,000 Americans found that 55% of respondents disapproved of Trump’s handling of the economy, the first time in any CNBC poll that he has been net negative on the economy while president. More Americans now believe the economy will get worse than at any time since 2023, and they are sharply more pessimistic about the stock market, according to survey results.
### Global Economic Developments
In other economic news, Asia-Pacific markets were mixed on Monday. Japan’s Nikkei 225 lost roughly 1.3%, while mainland China’s CSI 300 added around 0.3% as the People’s Bank of China kept its loan prime rates unchanged. The 1-year LPR currently stands at 3.1% and the 5-year rate is at 3.6%, according to CNBC.
### US Economic Activity
Chicago Fed President Austan Goolsbee said on Sunday that the US economy could be experiencing an elevated level of activity now as shoppers and businesses stock up on goods before tariffs kick in. “Activity might look artificially high in the initial, and then by the summer, might fall off — because people have bought it all,” Goolsbee said, according to CNBC. Sectors most affected include the auto industry and electric components.
### Executive Order to Overhaul State Department
The Trump administration could soon roll out sweeping changes to the US State Department, according to a 16-page draft executive order obtained by CNBC. If enacted, the order would shutter American embassies across Southern Africa, eliminate bureaus that work on issues like democracy and human rights, as well as international organizations like the United Nations.
### Earnings Reports
Market gyrations due to Trump tariffs might be subdued — but not entirely subside — this week, according to strategists. Investor attention will turn to first-quarter earnings reports, with Tesla and Alphabet announcing their performance on Tuesday and Thursday, respectively, according to CNBC.
### Trump’s Tariffs and Alaska LNG Project
Trump’s tariffs have also had an impact on Asian trade partners, with Alaska’s proposed 800-mile pipeline project showing new signs of life. The project, which has a staggering price tag topping $40 billion, has been stuck on the drawing board for years. However, Trump has touted the project as a national priority, and US Treasury Secretary Scott Bessent said earlier this month that the liquified natural gas project could play an important role in trade negotiations with South Korea, Japan, and Taiwan, according to CNBC.
Source link
