Trump pressured the Fed "There will be a big cut…perfect time to lower rates"

U.S. President Donald Trump on the 15th effectively ordered the Federal Reserve (Fed) to make a big cut (a 0.5 percentage-point reduction in the policy rate), saying "now is the perfect time to cut rates," thereby putting pressure on the Fed.

According to Bloomberg on the 14th (local time), President Trump told reporters that "I expect there will be a big cut." The Fed plans to hold a two-day Federal Open Market Committee (FOMC) meeting starting on the 16th to decide whether to cut the policy rate. Markets have effectively taken a 0.25 percentage-point cut in the policy rate as a foregone conclusion amid a slowdown in the U.S. labor market.

Even so, by mentioning a big cut, President Trump has put pressure on the Fed. He has pressured the Fed, which has not cut the U.S. policy rate, currently at 4.25–4.50%, citing inflation risks, to lower it to around 1%.

In fact, President Trump has insulted Fed Chair Jerome Powell as "an idiot" for not cutting rates boldly and has mentioned the possibility of dismissal. He also notified Fed Board member Lisa Cook, who has 13 years left until her term expires, of dismissal, citing allegations related to mortgage lending.

Some have raised concerns that an environment may have been created in which all FOMC members could be intimidated by President Trump's pressure. However, the prevailing view is that if the Fed's independence, which serves as a cornerstone of the global financial economy, is undermined, an economic backlash is likely.

Hong Min-seong Hankyung.com reporter mshong@hankyung.com