WASHINGTON — U.S. President Donald Trump said U.S. interest rates are too high, effectively pressing Federal Reserve Chair Kevin Warsh to cut them. The remarks are likely to add to the burden on Warsh, who signaled clearly last week at Jackson Hole that a rate increase is on the table.
Asked at a White House event on the 31st whether he opposed Warsh's signal of a rate hike and whether he had discussed the matter with the Fed chair, Trump said: "No. I respect him a lot and he'll do what he has to do." He went on to stress repeatedly that "our rates are too high" and that "we should have the lowest interest rates in the world."
Trump complained that "what people are saying is that you should never step on the gas pedal," referring to the view that rates should rise when the economy improves. "Gross domestic product could grow 14, 15, 16, even 20, and they're talking about raising rates every time the economy does well," he said. The comment was taken to mean that rate increases are throwing cold water on growth even when the economy could expand as much as 20%.
"Success and growth do not cause inflation. I don't like inflation either, but inflation happens for other reasons," Trump added. "We don't need to raise rates when we're doing well. In many cases, we should be lowering them." He said everyone would eventually come to understand.
Trump's remarks run counter to mainstream economics. Modern economic theory holds that failing to raise rates appropriately to moderate the pace of an overheating economy can lead to high inflation later. Trump also said inflation "happens for other reasons" but did not specify what those reasons are.
At the Jackson Hole economic symposium held in Wyoming on the 28th, Warsh signaled that the Fed could raise rates if inflation does not slow. The next meeting of the Federal Open Market Committee (FOMC), which sets the benchmark rate, is scheduled for September 15-16.
