On Tuesday local time, US President Trump said he hopes the new Federal Reserve chairman will take advantage of a strong economy. Lowering interest rates . This is the latest signal that Trump will nominate someone who strongly advocates for interest rate cuts to succeed current Federal Reserve Chairman Powell.
"I hope my new Fed Chair will cut rates when markets are performing well , not disrupt them for no reason," Trump tweeted on his self-created social media platform, Truth Social. "Anyone who doesn't agree with me will never be Fed Chair!"
Trump has repeatedly stated that he intends to break a recent trend: sometimes, even with strong economic data, markets experience sell-offs as investors worry about inflation and the subsequent interest rate hikes by the Federal Reserve.
"In the past, whenever good news came out, the stock market would rise. But now, when good news comes out, the stock market falls instead, because everyone thinks that the Federal Reserve will immediately raise interest rates to deal with 'potential' inflation," Trump wrote.
However, the unusual trend that Trump described did not materialize on the very day he made those remarks.
Data released Tuesday by the U.S. Bureau of Economic Analysis (BEA) showed that the initial estimate of the annualized quarterly rate of U.S. real GDP in the third quarter, adjusted for inflation, was 4.3%, a further increase from 3.8% in the second quarter. The report was delayed due to the government shutdown, while analysts had previously predicted a 3.3% growth rate for the third quarter. Meanwhile, the S&P 500 rose for the fourth consecutive trading day, ultimately closing at a record high.
Marshall Front, senior managing director at Front Barnett, said this paradox of "good news is bad news" can actually be traced back decades.
“Rationality will ultimately prevail, and data will guide how people interpret things,” Front said in a phone interview. “Wall Street focuses on economic fundamentals. The current economic fundamentals are solid, which will support corporate profits, and that’s what really matters to Wall Street.”
Trump is currently facing increasing political pressure to address voters' concerns about the high cost of living. He has repeatedly stated that lower interest rates would help boost the housing market and hopes that the final selection of the Federal Reserve Chairman will involve consulting him during the interest rate decision-making process.
Trump said last week that he had narrowed down his shortlist of candidates for Federal Reserve Chair to "three or four" and expected to make a decision soon, announcing the candidate "in the coming weeks."
Trump also stated that National Economic Council Director Kevin Hassett and former Federal Reserve Governor Kevin Warsh are leading candidates for the position of Federal Reserve Chairman. He also praised Federal Reserve Governors Christopher Waller and Michelle Bowman.
Earlier this month, the Federal Reserve lowered its benchmark interest rate to a range of 3.5% to 3.75%, marking its third consecutive rate cut. This decision was opposed by three Fed officials, two of whom advocated keeping rates unchanged. President Trump had previously publicly called for the Fed to lower the benchmark rate to around 1%, or even lower.
Just as Trump made these remarks, Hassett, a leading candidate for Federal Reserve Chair, said on Tuesday that despite the U.S. economy growing much faster than expected in the third quarter, the Fed's pace of interest rate cuts was still not fast enough. He believes the U.S. is far behind other countries in lowering interest rates, and artificial intelligence... Technological advancements are driving economic growth and pushing inflation down.
(Article source: CLS)
