Trump lashes out at Fed after Warsh backs rate hike

On Wednesday, US President Donald Trump expressed his strong disapproval of the Federal Reserve's decision to raise interest rates, in an attempt to combat persistent inflation. Trump took to his social media platform, Truth Social, to lash out at the Federal Reserve's decision, stating that interest rates in the United States should be 1%, or less, as America has the "Best Credit in the World - BY FAR".

He urged the administration to "LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!" The post was Trump's most direct criticism yet of the Federal Reserve chief, Kevin Warsh, whom he had recently appointed to take over the Fed from Jerome Powell. However, when speaking to reporters later, Trump claimed he still maintained confidence in Warsh, despite his pointed social media remarks.

Trump also hinted at an interaction with Warsh, saying he had discussed with him about the Fed's decision. The president appeared to blame persistent US trade deficits for the high borrowing costs set by the Fed, even though the two issues are largely separate. Trump had previously threatened to cut off trade with countries that have trade deficits if the Fed did not cut interest rates.

In a recent press conference, Warsh defended the Fed's decision to raise interest rates, describing it as a "sober decision, serious decision, responsible decision" given that inflation has been high for too long. He indicated that more rate hikes were likely, with 16 of 18 policymakers expecting at least one more quarter-point hike by the end of the year, with only two foreseeing stability in rates.

Warsh expressed opposition to sharing forward guidance and did not submit a projection. Despite Trump's criticism, he had previously pressured the Fed to hold rates steady during his administration.