"$360 Billion in National Debt Interest per 1% Interest Rate"
U.S. President Donald Trump mocked Federal Reserve Chair Jerome Powell, who refused to comply with his demand for a rate cut, calling him a "knucklehead" and pressuring him to lower the benchmark interest rate into the zero percent range.
On July 14 (local time), President Trump said in a White House speech, "We have a bad, really bad Fed chair," making these remarks.
Referring to Chair Powell, he said, "I just wish he would lower the rates," and added, "I tried to be nice to him, but it was no use." He continued, "He is like a knucklehead. A knucklehead is an idiot. He really is," openly criticizing him.
President Trump argued that the Fed should lower rates to below 1% in order to reduce the government's interest burden on national debt. The current benchmark interest rate is 4.25-4.5% per year, so he is demanding a cut of more than 3 percentage points.
He pointed out, "One percentage point in (interest rates) costs $360 billion," and added, "Two percentage points would cost $600 billion to $700 billion. It's too high." He emphasized, "There is no inflation and the stock market is at a record high. We should be at 1%, even lower than that."
Since President Trump took office in January this year, the Fed has kept the benchmark rate unchanged at 4.25-4.5% per year at four consecutive Federal Open Market Committee (FOMC) meetings. This is because the Fed believes it should maintain a cautious stance for the time being due to concerns about rising prices caused by President Trump's tariff hikes.
In response, President Trump has continued to mock Chair Powell and has increased pressure by even mentioning his dismissal. Recently, the White House sent an open letter to Chair Powell demanding an explanation for what it claims are excessive remodeling costs for the Fed headquarters building.
However, the market is warning that such attempts to undermine Powell could damage trust in the Fed's monetary policy independence, potentially leading to a sell-off of the U.S. dollar and government bonds.
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