Trump Wants Fed to Cut Rates to Match China's Expected Easing

(Photo: AP)

President Donald Trump pushed the Federal Reserve to “match” what he said China would do to offset economic hardship being caused by tariffs as he sought to draft the U.S. central bank into his simmering trade war.

“China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing,” the president said in a tweet Tuesday. “If the Federal Reserve ever did a ‘match,’ it would be game over, we win! In any event, China wants a deal!”

His explicit call for the Fed to be a weapon in the fight against China is a clear escalation in Trump’s repeated efforts to pressure the U.S. central bank to stimulate the U.S. economy, even though growth is solid and unemployment is at a 49-year low. The remarks may also help him deflect blame onto the Fed if the escalating trade dispute causes the U.S. economy to stumble as he seeks reelection in 2020.

The president’s comments will likely feed concerns in other countries over Trump’s willingness to break long-standing norms of international economic diplomacy. The U.S. has long complained about other governments applying political pressure on central banks and argued that Fed policy is driven by domestic economic priorities rather than any international competition.

Fed officials raised interest rates four times last year but have since signaled an extended pause as they wait for a tight labor market to lift inflation that has been persistently too low.

While financial markets expect the Fed to cut interest rates in the next year, Chairman Jerome Powell and his colleagues have indicated they don’t see a strong case for a move either way. They’ve also stressed that they will make moves independent of any political considerations.