Trump wants to cut interest rates
President Trump has called for the Federal Reserve to begin cutting interest rates, claiming that the policy is too harsh for a slower economy. Investors seem to agree with him more and more. It is still unknown if they are correct. But one thing is clear. The market is not in line with the Fed.
Recently, on March 19, the Federal Reserve’s own forecast (so-called dot plot) showed the median Fed officials expected to end at 3.9% of federal funding fees. That would mean Just one or two modest cuts by December.
But traders are betting if not. According to the CME FedWatch tool, Currently, it is possible that it is less than 8% The funding rate should exceed 3.75% by the end of the year. The most likely scenario is three or more cuts, bringing the rate into the 325-350 basis points range.
The market doesn’t believe in Powell. And for now, I’m with Trump.
Powell’s paradox of optimism, Trump’s concerns
The irony is that Trump appears to agree with his critics, including many of Wall Street. The economy is fragile and needs support. In contrast, Powell sounds like an optimist.
In his remarks last week, Powell hits the Hawkish Tone. He said inflation is sticky and the Fed is ready to maintain the rate for longer. However, the market barely blinked and continued to price interest rate cuts.
This creates an unusual situation.
- Trump reflects recession warnings from forecasters and market analysts.
- The market bets that the Fed will soon come to that view.
- Powell has established himself and claims that the policy is “good positioned.”
If it’s a Trump Bond Market If it’s wrong, Powell’s attention may be admirable. But if the pessimists are right, the Fed may soon find themselves catching up again.
If the darkness is correct, the cut is justified
The stories of the recession are everywhere. In early April, JP Morgan Research was estimated The probability of this year’s recession is 40% to 60%. Consumer sentiment is declining rapidly. According to a CNBC national survey, 49% of the population believe the economy will deteriorate this year, the worst since 2023.
As many headlines suggest, when the economy is really weak, Trump’s call for preemptive cuts seems wise. That’s the rationale behind insurance cuts Action before the recession takes hold.
Of course, the Fed also has its key points. The economy is still in place. Employment growth averaged 173,000 over the past two months, essentially identical to the past six months average. The unemployment rate is 4.2%, just 10th of the point higher than the average for the past six months. Retail sales are solid. Industrial production and housing are, on the contrary, surprising.
Destiny is everywhere, but it is not in the data yet.
And that’s cutting. Trump and the market are trading on expectations. Powell is currently in existence, and is responding to the actual economic situation. The risk is that by the time these conditions change, it may be too late. and “too late” As Trump pointed out in his recent Social Post of Truth, it’s a good explanation of Powell’s tenure with the Fed.
I don’t know who is right yet. But it’s becoming more and more clear Trump’s instincts about rates are more harmonious with market pricing More than Powell’s. Whether it reflects healthy judgment or premature concerns will depend on what the coming months will bring.
But for now, the Fed is an outlier. And Trump’s debate is gaining more converts each week.
