look news india
Just before the much-awaited monetary policy meeting of the US central bank Federal Reserve, the political and economic turmoil in America regarding interest rates has intensified. Former US President Donald Trump has made a big and aggressive claim saying that America’s interest rates should be the lowest in the world. Speaking to reporters at the Irish Open golf tournament, Trump strongly criticized the Federal Reserve’s policies and high rates. He argued that no matter what current financial data or inflationary conditions indicate, the US should get capital at the cheapest rates globally.
Trump cited several reasons, citing the American economy, global trade and his financial understanding, in support of his claim:
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‘The best credit in the world’: Trump stressed that the United States has the strongest and most reliable credit profile in the world. His argument is that when a country’s creditworthiness is excellent, why should it pay more interest than any other country in the world?
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‘We are making other countries rich’: Trump believes that keeping interest rates high in the US allows global investors to earn higher returns in US bonds and dollars. According to him, this policy of the Fed is enriching foreign countries and investors by picking the pockets of American citizens and businessmen.
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‘Best understanding of the formula’: Trump said confidently, “I understand financial formulas better than anyone.” He says that low interest rates act as oxygen for economic expansion, manufacturing and industries, while the complex models of the central bank slow down the pace of the economy.
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Trade Deficit and Threat of Tariffs: Trump had also recently warned that if the interest rates are not reduced, he can completely stop trade with those countries with which America has a high trade deficit.
This statement of Trump has come at a time when the Federal Reserve’s Rate-Setting Committee (FOMC) is going to meet:
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Latest surge in inflation: The latest Consumer Price Index (CPI) data released by the US Labor Department has recorded the largest increase in the last four months.
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Dilemma of rate cut vs increase: Due to the rise in crude oil and energy costs, there is increased fear in the market that instead of cutting interest rates, the Fed may keep the rates stable or increase them slightly.
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Election environment and pressure from common citizens: Cost of living and loan EMIs have become the biggest issues for voters ahead of the upcoming US midterm elections. In such a situation, high interest rates are directly making home loans, car loans and credit cards expensive.
Donald Trump has long been raising questions about the independence of the Federal Reserve and its decisions. While National Economic Council officials say the Fed chief is authorized to make independent decisions, Trump’s public pressure indicates that he is in favor of returning to power or in political discussions to bring interest rates to record lows so that the US domestic market can get cheap loans.