President Donald Trump is still criticizing the US central bank, exerting increasing pressure to ease monetary policy. Trump`s recent statements point to his great determination.
President Trump said in social media that more central banks are cutting interest rates. He added that China is not the US problem. "The problem of the United States is the Federal Reserve, too proud to admit the mistake of raising interest rates too quickly," wrote Donald Trump. He added that the Fed must cut interest rates to a much greater extent.
New Zealand, India, Thailand – central banks of these countries cut interest rates this week more than expected. There are also many indications that the European Central Bank is also preparing to take more decisive action in order to fight the weakening economy and low inflation. All this could have influenced Donald Trump's statements. It can also put pressure on the Federal Reserve itself.
Pressure on the Fed does not only result from political pressure, but also from market pressure. Investors expect with 85 percent probability that in September the Federal Reserve will decide to cut interest rates by 25 basis points. And that would not be the end of monetary easing in the US. If the Fed, which is quite resistant at the moment, changes its mind, it may also affect the US currency.
More interest rate cuts in the United States could put pressure on the US dollar, and then President Trump could announce his triumph, because not only that the Fed would cut rates, the dollar would also get cheaper. It would fit perfectly into the campaign before the presidential election in the US, which will take place next year.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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