[Column] The market rejected Trump's pressure tactics

The US Federal Reserve raised its benchmark interest rate, but President Donald Trump attempted to block the hike, which is detrimental to the upcoming midterm elections. The Fed's action was primarily about catching up with the market's increased rates rather than resisting political pressure. The 10-year Treasury yield reached a 19-year high, surpassing 5%.

If the Fed had kept the rates steady, investors would have questioned the central authority's independence and commitment to inflation control, resulting in an even higher rate rise. Central banks have long determined interest rates based on economic factors while continuously maintaining the perception of independence from politics.

However, with the current erosion of norms, aggressive leadership is undermining the rationality that economics relies on. Trump has pressured the Fed to freeze or reduce interest rates, claiming that a strong US economy justifies lower rates. Economists, including Nobel laureate Paul Krugman, argue that a robust economy warrants higher interest rates.

Trump's statements regarding rate cuts can be considered "economic bullshit," as he disregards rationality for political gains. His claims, such as a "greatest economy ever," to advocate for fiscal stimulus, may lead to spiraling inflation and fiscal strain. Trump also attributes tariffs to benefitting American consumers, despite the burden largely falling on them.

The Federal Reserve Bank of New York found that 94% of tariff costs burden US companies and consumers during the first eight months of Trump's second term. Trump's approach doesn't align with the economic principles that have governed the global system for years, as he tries to suppress rational economic practices.