Trump Says Next Federal Reserve Chair Must Strongly Support Lower Interest Rates

BY COMFORT OGBONNA

U.S. President Donald Trump said on Wednesday that the next chairman of the Federal Reserve will be someone who firmly believes interest rates should be much lower, signaling his continued push for looser monetary policy as a key part of his economic agenda.

“I’ll soon announce our next chairman of the Federal Reserve, someone who believes in lower interest rates, by a lot, and mortgage payments will be coming down even further,” Trump said during a nationally televised address highlighting what he described as economic and national security achievements in the first year of his second term in office.

Trump has previously indicated that he plans to announce his pick to succeed current Fed Chair Jerome Powell early next year. Several names have emerged as leading contenders, including White House economic adviser Kevin Hassett, former Federal Reserve Governor Kevin Warsh, and current Fed Governor Chris Waller. All are generally seen as favoring lower interest rates than current levels, though none has publicly endorsed the dramatic cuts Trump has called for in the past.

The president has at times suggested that interest rates should fall to as low as 1%, a level typically associated with severe economic crises. By contrast, the Federal Reserve’s benchmark interest rate currently stands in a range of 3.5% to 3.75%. Even Trump’s most recent appointee to the central bank’s board, Governor Stephen Miran, has not argued for rates anywhere near the levels Trump has advocated.

Lower mortgage rates have been a consistent focus for Trump, who has argued that cheaper borrowing costs would further stimulate economic growth and ease financial pressure on American households. However, the Fed’s policy rate has only an indirect influence on mortgage rates, which are more closely tied to longer-term interest rates such as the yield on the 10-year U.S. Treasury note.

Those longer-term rates are shaped largely by investor expectations for inflation, economic growth, and government borrowing. Over the past year, the 10-year Treasury yield has remained relatively stable, helping to keep mortgage rates stuck in a narrow range. Since Labor Day, average U.S. mortgage rates have hovered between 6.3% and 6.4%, with little sign of a sustained decline.

In an interview last week with The Wall Street Journal, Trump said he was leaning toward either Warsh or Hassett to lead the central bank, though he emphasized that the decision was not final. Interviews continued this week, including a meeting on Wednesday with Waller, who has been among the more vocal Fed policymakers in favor of lower rates while also strongly defending the institution’s independence from political pressure.

Trump has also revived debate over the relationship between the White House and the Federal Reserve, suggesting the next Fed chair should consult with him on interest rate decisions. Traditionally, presidents refrain from direct involvement in monetary policy, leaving rate-setting to the central bank to preserve its independence.

“Typically, that’s not done anymore. It used to be done routinely. It should be done,” Trump said. “It doesn’t mean I don’t think he should do exactly what we say. But certainly we’re I’m a smart voice and should be listened to.”

His remarks underscore the likelihood that monetary policy and the independence of the Federal Reserve will remain central issues as he prepares to name the next leader of the U.S. central bank.