WASHINGTON, Aug 31 - President Donald Trump told reporters in the Oval Office on Monday that he holds "a lot of respect" for Federal Reserve Chairman Kevin Warsh and that Warsh "will do what he has to do" when it comes to interest-rate policy.
The president reiterated his long-standing push for lower borrowing costs, saying, "We should pay, in my opinion, the lowest interest rates anywhere in the world by far." Trump has repeatedly called for rate cuts as part of his broader economic messaging.
Chairman Warsh, in a recent public address, cautioned that the U.S. central bank will "have work to do" if officials do not secure the confidence that inflation is moving down toward the Fed's 2% objective. That warning underlines the tension between the Fed's inflation goal and political pressure to reduce rates.
On the inflation data front, the Fed's preferred gauge - the Personal Consumption Expenditures Price Index - remained at 3.7% on an annual basis for July. That reading sits above the central bank's 2% target and is central to policymakers' deliberations on monetary policy.
Affordability has emerged as a prominent concern for voters as the U.S. heads into the November midterm elections. With household budgets sensitive to borrowing costs and price levels, policymakers' choices on interest rates will be watched closely by both markets and political observers.
Officials from the Federal Reserve are scheduled to meet next month to consider any changes to interest-rate policy. That meeting will offer the central bank a forum to weigh recent inflation readings and the broader economic backdrop before deciding on a policy path.
Context and near-term watch points
- The president publicly expressed respect for the Fed chair and urged substantially lower interest rates.
- Fed Chair Warsh cautioned that further work is needed if confidence does not rise that inflation is heading to 2%.
- The personal consumption expenditures price index stood at 3.7% year-on-year in July, remaining above the Fed's stated target.
- With affordability a voter concern ahead of November's midterms, the upcoming central bank meeting next month will be closely observed.