Trump has explicitly stated that the next Federal Reserve Chair must believe in “large-scale rate cuts” and will soon announce the candidate. He demands to lower interest rates to a crisis level of 1% and believes the next Chair should consult with him on rate setting. This article is sourced from Wall Street Insights, organized, translated, and written by Foresight News.
(Background summary: Trump named Kevin Warsh as his “preferred” candidate for the next Fed Chair, with Kevin Hassett’s chances dropping by 30%)
(Additional background: Trump: Rate cuts are a test for the Fed Chair, and tariffs may be adjusted to lower some prices)

Table of Contents

• All three candidates support rate cuts, but to varying degrees
• Trump demands Fed Chair to consult with him on rate decisions
• Rate cuts have limited impact on mortgage rates

On Wednesday, U.S. time, President Trump clearly stated in a nationwide speech that the next Fed Chair must be someone who believes in “substantial rate cuts,” and he promised to announce this critical appointment soon. This statement highlights Trump’s dissatisfaction with current monetary policy and his attempt to influence the independence of the Federal Reserve.

Trump said during the speech: “I will soon announce our next Federal Reserve Chair, someone who believes in significantly lowering interest rates, and mortgage rates will further decline.” Currently, the Fed’s benchmark interest rate range is 3.5%-3.75%, while Trump has previously called for a rate as low as 1% in a crisis.

Last week, Trump revealed in an interview with The Wall Street Journal that he favors former Fed Governor Kevin Warsh(Kevin Warsh) or White House economic advisor Kevin Hassett(Kevin Hassett) to serve as Chair.

More notably, Trump explicitly stated that the next Fed Chair should consult with him on rate setting, breaking the traditional practice of presidential non-interference in rate decisions.

All three candidates support rate cuts, but to varying degrees

The known finalists include White House economic advisor Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller. All three advocate for interest rates below the current levels.

However, none of the candidates have explicitly indicated they would push the Fed to cut rates to the levels Trump demands. Trump has sometimes called for rates to be cut to 1% in a crisis, but even his latest appointee, Stephen Muil, does not advocate such a low rate.

On Wednesday, Trump continued interviewing candidates, meeting with Waller. Waller was among the earliest Fed policymakers to advocate for rate cuts but is also a staunch defender of Fed independence.

According to a previous Wall Street Insights article, Waller said in a speech on Wednesday that with the labor market weakening and inflation under control, the Fed still has room to cut rates by 50 to 100 basis points, but there is no need to rush; rates should be gradually brought toward neutral. He believes that with employment not experiencing a sharp decline and inflation expectations stable, conditions are suitable for moderate rate cuts, and the Fed will balance between steady growth and inflation control.

Trump demands Fed Chair to consult with him on rate decisions

Last week, Trump told The Wall Street Journal that he believes the next Fed Chair should consult with him on rate setting. This request diverges from the traditional practice of leaving rate decisions to the Fed.

“Usually, this practice is no longer followed now. But it used to be routine, and it should be now,” Trump said. “This doesn’t mean—I don’t think he should follow everything we say. But we are, I am a smart voice, and should be listened to.”

This statement has raised concerns about Fed independence. The independence of the Fed is viewed as a key factor in maintaining effective monetary policy and market confidence.

Hassett previously stated that if he is chosen to lead the Fed, he would consider the President’s policy opinions, but the central bank’s rate decisions would remain independent. Hassett explicitly rejected the idea that presidential opinions carry equal weight with FOMC voting members.

He said policymakers can freely reject the President’s opinions and “vote differently.” Hassett said, “He won’t have any weight. It’s just that if his opinions are good, data-driven, then his opinions matter.”

Rate cuts have limited impact on mortgage rates

Trump repeatedly expressed a desire to lower mortgage rates, but the rates controlled by the Fed have limited influence on long-term borrowing costs. Mortgage rates are more affected by long-term interest rates less influenced by the Fed, such as the 10-year U.S. Treasury yield.

The 10-year Treasury yield is mainly driven by investor expectations for U.S. economic growth and inflation, with little overall change over the past year. Since Labor Day, mortgage rates have remained in the 6.3%-6.4% range, with almost no signs of decline.