Trump says that the 2% inflation target is too low

Today, Trump raised his concerns again about the delay in interest rates. According to POTUS, the Fed chairman is incompetent and uses delayed data; therefore, the Fed is broken and needs to be fixed.

Since the start of his second term, Trump has been against the Fed and tried to fire the chairman and governor. His plan, compared to other global leaders, shows a lack of trust in his own government.

For instance, President Vladimir Putin, who is known to be an authoritarian, shows full support for the country’s central bank. As reported by Cryptopolitan, Putin defended the central bank’s use of very high interest rates, currently at 18%, to tackle inflation. This is a stance fiercely criticised by business leaders and bankers. 

Putin also said that he usually has constant talks with the Central Bank. On the other hand, Trump does not see eye to eye with the Fed; he prefers to talk and insult the Fed through social media. 

Trump says that the 2% inflation target is too low

In today’s announcement, Trump said, “He(Too late) has done a terrible job since he adapted a two target.” Adding that it is too low and too rigid. He added that the Fed does not believe that the money supply is important.

The Fed’s July minutes showed “almost all” officials supported keeping rates unchanged at 4.25%-4.50%. Only Michelle Bowman and Christopher Waller dissented in favor of a quarter-point cut to protect a weakening job market. According to CME, the Fed might lower the rates by 25bps. This will still be too little for Trump, as he expects cuts to 3%.

However, Fed Chair Jerome Powell signaled the door is open to a September rate cut. He cited rising risks to the labor market even as inflation pressures linger. The Fed aims to keep inflation at 2% and Powell’s priority.

On the other hand, Russia’s target for inflation is 4%.  Unlike the Fed, Russia has been flexible with its rates. The central bank hiked the key rate to 21% last year, the highest level since the early 2000s, to bring inflation down. It cut the key rate to 20% in June and 18% in July. The bank makes its next rate decision on September 12.

When recession worries about the US economy were rising, Trump pointed to the Fed. On the contrary, a graph in a report last week showed that Russia’s GDP fell for two quarters in a row. This is what economists usually mean by “technical recession.”

German Gref, the CEO of Sberbank and one of Russia’s most important bankers, said that the economy was in “technical stagnation” and that the central bank needed to lower interest rates.

Putin said, “No” when asked if he agreed with Gref. He supported the Central Bank.

Trump says Fed’s independence is not that important

Americans’ concerns about the battle between Trump and the Fed have been about its independence. However, today, the POTUS has said that he is concerned about the Fed’s competence, not whether it is independent or not.

Recently, Trump mentioned that before 1913, the US was independent of the Fed and depended on tariffs. He said an 1880s congressional committee focused on distributing excess tariff revenue because the US was at its peak. According to him, the income tax system began in 1913, replacing tariffs.

Meanwhile, Trump is trying to get rid of the members of the Fed who don’t agree with his agenda, like Powell and Cook. It is still unclear whether he wants to get rid of the Fed or whether he wants to control it.

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