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Trump pressures Fed to cut rates to soften blow from tariffs - THE TELEGRAPH
Hannah Boland
Donald Trump has piled pressure on the US Federal Reserve to cut interest rates as he tries to soften the blow from his own tariffs.
The US president said the Fed would be “much better off cutting rates” in a post on Truth Social, just hours after officials voted to hold rates at 4.5pc.
Mr Trump said lower borrowing costs would help as “US tariffs start to transition (ease!) their way into the economy”, as he urged the Fed to “do the right thing”.
The debate over interest rates has escalated after Mr Trump announced tariffs on imports worth a collective $770bn (£592bn) since taking office.
Economists at UBS have suggested this is seven times what he implemented during his first term trade war.
On Wednesday night, Mr Trump also fired a fresh salvo at the EU. Speaking on Fox News, he said the US had been “raped and pillaged” by the trading bloc, as he claimed that tariffs would help reduce the US national debt.
As part of the latest interest rate decision the Fed also slashed its growth forecasts for the US owing to the uncertainty fuelled by Mr Trump’s trade war.
The central bank downgraded growth forecasts for the year to 1.7pc from 2.1pc in December, and raised their forecasts for inflation to 2.7pc from 2.5pc. This is well above the Fed’s 2pc target.
The Fed’s Open Market Committee (FOMC) pointed to Mr Trump’s tariff agenda as a key factor in the forecast changes, saying: “Uncertainty around the economic outlook has increased.”
Jerome Powell, Fed chair, warned that Mr Trump’s tariffs would drive up inflation, which stood at 2.5pc in January.
Business chiefs in the US have also warned over looming price increases, including retailer Target which said fruit and vegetable costs were “highly likely” to rise for customers.
Mr Powell said: “Clearly some of it, a good part of it, is coming from tariffs.”
“The SEP [Summary of Economic Projections] doesn’t really show further downward progress on inflation this year and that’s really due to the tariffs coming in.”
He said the US central bank would take a cautious approach to further cuts, saying: “I think we’re not going to be in any hurry to move. I think we’re well-positioned to wait for further clarity.”
However, US stocks were buoyed by suggestions from Fed officials that the central bank could push through two interest rate cuts this year.
The S&P 500 rose by 1.08pc and the Nasdaq Composite increased by 1.41pc.
