US President Donald Trump delivered strong messages regarding monetary policy and the Federal Reserve chairmanship in statements made on the social media platform Truth Social.
Trump stated that no one who did not share his views would be appointed as the Fed Chairman, and he asked the newly appointed Fed Chairman to support growth rather than harm the markets.
Trump argued that the economic data released today was extremely strong, stating that the US economy had performed better than expected. He noted that gross domestic product (GDP) had increased by 4.2 percent, compared to market expectations of 2.5 percent, and claimed this increase occurred “despite the downward pressure from the recent shutdown caused by the Democrats.”
However, according to Trump, the modern market structure no longer properly prices such positive data. He stated that in the past, good news boosted stock markets, but nowadays, investors create expectations of interest rate hikes due to inflation concerns, which then puts pressure on markets. Arguing that this approach harms strong and healthy markets, Trump said, “Strong, even extraordinary markets don’t create inflation; the real problem is wrong decisions and recklessness.”
The US President emphasized that the new Fed chairman should lower interest rates when the market is performing well, stating, “I want a Fed that strengthens a well-functioning market, not one that unnecessarily destroys it.” Trump argued that interest rate increases stifle rallies, preventing the US economy from potentially achieving an additional 10, 15, or even 20 percentage points of growth within a year.
Addressing the issue of inflation, Trump argued that price pressures would balance out naturally over time. He stated that interest rate hikes could be implemented at the appropriate time if necessary, but stressed that the right time wasn’t to kill market rallies. Criticizing the current approach, Trump said, “The US should be rewarded for its success, not dragged down by it.”
*This is not investment advice.