In an incredibly incoherent, statistically false, and grammatically questionable post to Truth Social, President Trump again publicly put himself in the middle of a policy debate in which he doesn’t belong.
Although painful to read, to give context, here is the full text of the post:
“”Preemptive Cuts” in Interest Rates are being called for by many. With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other “things” trending down, there is virtually No Inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already “lowered” seven times. Powell has always been “To Late,” except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?”
In what was not the first time that he has done so, Trump called on, in his insulting way, Federal Reserve Chair Jerome Powell (referred to in the post as “Mr. Too Late, a major loser) to lower interest rates.
The problem is that Trump shouldn’t call the Federal Reserve to do anything.
By law, the Federal Reserve is independent, so unless the elected members of Congress change that, Trump has no business directing Powell to do anything.
The Federal Reserve was created by an act of Congress in 1913 and, since 1977, has been independent to set rates without interference from the White House.
Furthermore, there is inflation – besides Energy prices coming down in the March Consumer Price Index, much of what Trump states above is categorically false.
First, egg prices – and most other food categories were still rising in March. As reported by the Bureau of Labor Statistics on April 10:
“The index for food increased 0.4 percent in March, after rising 0.2 percent in February. The food at home index rose 0.5 percent over the month as four of the six major grocery store food group indexes increased. Driven primarily by a 5.9-percent increase in the index for eggs, the index for meats, poultry, fish, and eggs rose 1.3 percent in March. The beef index also increased over the month, rising 1.2 percent. The index for other food at home increased 0.5 percent in March and the index for dairy and related products rose 1.0 percent. The nonalcoholic beverages index increased 0.6 percent over the month.”
That clearly is not ‘no inflation’.
Additionally, the indexes for personal care, medical care, education, apparel, and new vehicles all increased.
Inflation is a key metric that the Federal Reserve uses to determine its actions.
Interest rate changes can have both positive and negative effects on the economy, and the balance of these competing forces must be carefully weighed to ensure that unintended consequences don’t ensue.
Furthermore, interest rate changes don’t just affect the consumer; they also impact both the stock and bond markets.
Clearly, lowering interest rates makes it less expensive for people and companies to borrow money, which can increase spending and investment and often boost stock prices. The opposite is true for the bond market – when interest rates are lowered, bond prices usually rise.
Trump loves a good boost to stock prices. Perhaps that is his motivating factor.
But the American consumer – and the American Government, for that matter – can hardly afford to take on more debt.
The Government owes over $36 trillion, much of that funded on the back of Treasury Bonds issued to other foreign governments. Trump better hope those countries don’t all rush to sell off their bonds simultaneously.
Furthermore, the American consumer isn’t in much better shape.
Combined, Americans have accumulated a total of $18.036 trillion of debt, which is an average of $105,056 per household. According to the Federal Reserve, total debt is at an all-time high as of the fourth quarter of 2024.
Maybe that is why the Fed Chair is hesitant to cut rates.
Or, maybe it is because the Chair knows that further cuts could heat up inflation.
After spending the past couple of post-COVID years trying to get inflation back down, perhaps they are skittish to rush back into that cycle again.
Ultimately, as evidenced by his Truth Social post, Trump doesn’t understand his own government’s data or economics (and blatantly lies to paint a rosier picture of the economy), but whatever Trump’s motivation for meddling, he really should leave such important matters to the professionals who do understand.