Trump Can Have Lower Interest Rates Without Bullying the Fed
It’s too early to let down our guard against tariffs, but the inflation picture is looking increasingly benign.
Under pressure.
Photographer: Andrew Caballero-Reynolds/ AFP
President Donald Trump caused some collective hyperventilation among central bank watchers last week when he said he would “demand” lower interest rates and understood rates better than Federal Reserve Chair Jerome Powell. But, he may well have a path to lower borrowing costs that doesn’t include undermining the credibility of the world’s most important central bank.
The floor that bond markets have put under Treasury yields, mortgage rates and other key borrowing costs for consumers and businesses has a lot to do with the looming uncertainty around whether Trump will institute large new tariffs and drive up prices. But as everyone’s been distracted by the president’s bombastic rhetoric — including recent tariff threats against Colombia, Mexico and Canada — the fundamental picture has been shifting for the better.