Trump no longer singlehandedly criticizes the chairman of the Federal Reserve: the pressure to cut interest rates is shifting to the entire council

The Zhitong Finance App learned that US President Trump recently once again stated his position on interest rate policy, but acknowledged that this was not the decision of the Federal Reserve Chairman alone — compared to his sharp criticism of his predecessor in the past, this argument has clearly softened, drawing the market's attention to subtle changes in the relationship between the White House and the Federal Reserve.

The attitude towards the Federal Reserve changed from attack to defense

In an interview on Friday (August 7), Trump was asked if Federal Reserve Chairman Kevin Walsh should avoid raising interest rates before the November midterm elections. He responded, “It depends to some extent on him, but it's not entirely up to him to decide. And he has a very politicized council.” He once again criticized some members of the Federal Reserve Board of Governors, including former Chairman Jerome Powell and current board member Lisa Cook, saying, “This is not entirely up to him; it is decided by a board of directors.”

This statement is in stark contrast to Trump's previous lash against the Federal Reserve. Before Walsh was nominated, Trump frequently criticized former Chairman Powell for cutting interest rates too slowly, and even publicly called for negative interest rates many times, breaking the White House's traditional practice of not commenting on central bank policies. This admission “was not decided by the chairman alone,” and was interpreted by the market as a gentle test against Walsh rather than direct pressure.

Unconventional economic logic: good data = low interest rates?

Trump also said in the interview that he wants to “go back to those days” — that is, positive economic data means that interest rates are falling, which paints a completely different picture from the normal relationship between the economy and monetary policy. “In the past, when you published impressive economic data, interest rates declined,” he said.

However, this logic is contrary to the mainstream monetary policy framework. Normally, strong economic data often means increased inflationary pressure and the risk of overheating, and central banks tend to raise interest rates to calm the cycle. Trump's “good data = low interest rate” statement reflects that it focuses more on political demands to reduce borrowing costs to stimulate growth rather than traditional inflation-management logic.

The White House and the Federal Reserve: Market Concerns in a Delicate Balance

Recently, according to people familiar with the matter, Trump has been speaking with Kevin Walsh on the phone regularly since he became chairman of the Federal Reserve. This is the latest sign that Trump is trying to exert more influence on the central bank.

The person mentioned above, who requested anonymity in order to discuss the private conversation, said that since Walsh was confirmed by the Senate in May, the two have spoken many times. Trump will inquire about Walsh's economic predictions and opinions, but he has not pushed him to take any specific policy action. One of the sources said that the two were not talking regularly, while the other said that the call frequency was not high. It is unclear whether the two have discussed monetary policy.

Although the details of the call are unclear, Trump has long called for a sharp cut in interest rates from the Federal Reserve. Although there have been calls and meetings between successive presidents and the chairman of the Federal Reserve, they are extremely rare, and Trump's push to influence monetary policy is arguably the strongest intervention in central bank decisions in decades.

Walsh's background itself also provided the market with room for imagination. As an economic adviser during the Bush administration and a former Federal Reserve member, he was viewed as a “congressional” candidate, and the market's mainstream expectations for his policy stance were dovish. However, Trump's statement that “it is not entirely up to him” also suggests that there are checks and balances within the Federal Reserve Board of Governors — in particular, Powell's remaining board member and the existence of officials appointed during the Biden era, such as Cook, which means that Walsh may not be able to fully control his voice when pushing for policy changes.

Market impact and outlook

The current CME FedWatch tool shows that the market's expected probability of a September rate hike has dropped to 55% from 67% last week. Although Trump's statement did not directly change the policy path, it further strengthened the market's perception that the White House favors a low interest rate environment. At the same time, the Federal Reserve's decision-making independence is still facing potential political pressure, especially as the midterm elections approach, and the political nature of monetary policy may be difficult to completely avoid.

For investors, the interaction between Trump and Walsh will be a variable that will continue to be tracked in the coming months — if the relationship between the two moves from “gentle testing” to “direct pressure,” it may shake the market's confidence in the independence of the Federal Reserve, which in turn will trigger additional fluctuations in the US debt and dollar exchange rates.