Donald Trump has called for interest rates to be cut later this month, stating that higher rates put the US at a "very unfair disadvantage." The president's remarks followed stronger-than-expected jobs figures in the US, which have contributed to rising expectations that rates could be increased, as inflation remains high and American households are affected by rising prices.
The US economy added 162,000 jobs in August, nearly triple the 56,000 forecast by analysts, with significant hiring in the hospitality and education sectors. Trump emphasized that the US should have the "LOWEST RATE of any country in the World." He stated, "The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won't allow that to happen!"
Last week, Kevin Warsh, chairman of the US central bank, indicated that rates could be raised if policymakers are not confident that price increases are easing for Americans. Inflation, which measures price increases over time, remains above the Fed's 2% annual target, with prices rising 3.4% in the past 12 months, according to the latest data.
The next interest rate decision is scheduled for September 15-16. Rates were held steady between 3.5% and 3.75% in July for the fifth consecutive time, but concerns over inflation persist due to ongoing tensions between the US and Iran, which have led to a surge in global oil prices.
On Friday, US diesel prices reached an all-time high of $5.85 per gallon on average, compared to $3.71 a year ago. Despite rising living costs, wages appear to be increasing, with average hourly earnings for all employees at $37.75 in August, reflecting a 3.1% increase.
Stephen Brown, chief North America economist at Capital Economics, noted, "Even the most committed dove would struggle to find anything in the August employment report to justify keeping interest rates unchanged." He added that the strength in the jobs market means that the latest inflation figures released next week would only need to be moderately above the Fed's target to increase expectations of a September rate hike.
Neil Birrell, chief investment officer of Premier Miton, stated, "A hike in rates just became a bit more likely." According to CME Group's "FedWatch" data, nearly 60% of traders are betting on an interest rate hike in September.
The increase in employment during August was driven by growth in restaurants and bars, as well as local government education ahead of the new school year. Weaker job figures released earlier in the summer were revised upward by the US Bureau of Labor Statistics, indicating a stronger labor market than previously thought. Instead of a loss of 23,000 jobs in July, the revised estimates showed that 44,000 jobs were created.
Despite the increase in jobs, the US unemployment rate remained unchanged at 4.1% last month, with seven million individuals out of work. Both measures have seen little change over the year. In reaction to the stronger jobs figures raising expectations of a rate hike, US stock market indexes were trading down on Friday. Trump described the market's response as "crazy," stating, "We just got GREAT Numbers on Jobs, the Market should go UP, because our Credit and Economy are better but, as always, for the past 25 years, the Stock Market goes DOWN, because we're living under False Reality that if things are good, you've got to 'KILL IT' because of a 'fear' of Inflation."