Trump Threatens to Halt Some Trade Unless the Fed Cuts Rates

President Donald Trump urged the Federal Reserve to cut interest rates, warning he would stop trading with countries with which the US runs a deficit if the central bank fails to act. Trump's demands came in a lengthy social media post after a stronger-than-expected August jobs report, which could prompt Fed officials to raise rates at their next policy meeting starting September 15.

The president praised his chosen Fed Chairman Kevin Warsh and board members, urging them to "get smart" and "BE PATRIOTS for a change." Trump stated that higher interest rates put the US at an unfair disadvantage and vowed not to allow it. The US Supreme Court had previously upheld his right to take such action. However, pursuing trade embargoes could likely spark a legal challenge.

It remained uncertain how this move would help lower US borrowing costs. Trump's pressure on the Fed appeared to be renewed just months after Warsh took over from Jerome Powell, whom the president had frequently criticized. The president's approval ratings had dropped ahead of November's midterm elections, with polls indicating Americans were unhappy with his handling of the cost of living and the Iran war.

US jobs growth unexpectedly jumped in August, with non-farm payrolls adding 162,000 positions and the unemployment rate remaining unchanged. Investors increased bets on a Fed rate hike at the upcoming meeting, causing stocks and short-dated bonds to fall. Trump reacted negatively to the market slide, accusing the stock market of being in a "false reality."

His comments surpassed those of his top economic adviser, Kevin Hassett, who had earlier argued that the jobs numbers supported keeping interest rates steady. Hassett told CNBC that the argument for holding rates would be strong.