Trump Says He Won't Criticize Kevin Warsh Over Rate Decisions — Pushes For US To Have Lowest Interest Rates In The World

• Trump argued that, unlike decades ago, strong economic data now fuels expectations of higher interest rates rather than lower borrowing costs.
• He singled out Switzerland to illustrate his point, noting that it borrows at roughly half a percentage point while the U.S. pays considerably more.
• Trump added that he could erase the U.S.'s roughly $39 billion trade deficit with Switzerland "with one stroke of the pen" by restricting Swiss imports.

President Donald Trump voiced confidence in Kevin Warsh on Friday, saying he would not criticize him over interest rate decisions, saying that they are “not totally up to” the Federal Reserve Chair.

“It's up to him a little bit, but not completely. He's got a board that's very political,” Trump said during an interview with Punchbowl News. His comments come after the Fed decided to keep interest rates unchanged after Warsh’s first two meetings as its Chair.

Trump Says US Should Have World's Lowest Interest Rates

Trump argued that the U.S. should have the lowest interest rates globally, saying the current system unfairly rewards other countries despite the economic strength of the United States.

He said that, unlike decades ago when strong economic data led to lower borrowing costs by signaling stronger creditworthiness, markets today expect robust economic numbers to result in higher interest rates as investors anticipate further Fed tightening.

“I want to go back to those days,” Trump said, adding that the U.S. should once again enjoy the world's lowest borrowing costs.

Meanwhile, the 10-year Treasury yield stood at 4.662% on Friday, edging lower by a basis point.

The iShares 20+ Year Treasury Bond ETF (TLT) was flat at the time of writing, while the iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.08%.

Trump Singles Out Switzerland

To illustrate his point, Trump singled out Switzerland, noting that it borrows at roughly half a percentage point while the U.S. pays considerably more.

Trump argued that the U.S. runs an annual trade deficit of about $39 billion with Switzerland and claimed he could eliminate that deficit “with one stroke of the pen” by restricting Swiss imports. Without access to the U.S. market, he said, Switzerland would no longer enjoy its privileged economic position.

He added that many countries benefit economically because of the U.S. and argued that the United States should therefore be paying the world's lowest interest rates rather than higher borrowing costs than its trading partners.

Calls Grow For A Rate Hike

Trump’s latest push for lower interest rates comes amid growing calls for rate hikes to keep inflation in check.

Bank of America CEO Brian Moynihan reiterated the bank's forecast for three interest-rate hikes this year, in September, November and December, saying inflation remains too elevated despite signs of progress.

Meanwhile, Federal Reserve Bank of Minneapolis President Neel Kashkari said gradual rate hikes should begin as early as September, arguing that policymakers should act before inflation becomes more entrenched.

Cleveland Fed President Beth Hammack also called for raising rates sooner rather than later, saying she is “not confident” inflation will return to the Fed's 2% target without additional policy tightening and warning that delaying action could require more aggressive rate increases later.

Meanwhile, U.S. equities gained in Friday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.26%; the Invesco QQQ Trust ETF (QQQ) rose 0.54%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.13%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bullish’ territory.

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