"Raise It" "Cut It" ... U.S. Clashes Again Over Interest Rates

As concerns over rate hikes spread, U.S. President Donald Trump instead repeatedly urged the new Federal Reserve System (Fed) Chair Kevin Warsh to cut interest rates. On Wall Street, however, some even raised the possibility of a rate hike. With a solid labor market and inflation worries, the Fed's next move has once again become a key variable.
In an NBC interview on the 7th local time, Trump said, "We have grown the economy by keeping rates low" and added, "I do not want to ruin success. Rates should be cut." He also stressed to new Chair Kevin Warsh, "It is not right to immediately raise rates and disadvantage a country where the economy is doing well. Rates should be lowered to encourage growth."
Trump has argued that the benchmark rate, now in the 3.5% to 3.75% range, should be lowered to below 1%. His remarks drew attention because they came as the U.S. economy showed stronger-than-expected momentum. According to the U.S. Department of Labor, nonfarm payrolls rose by 172,000 in May from the previous month. That was far above the market forecast of 80,000. As the strong employment data was confirmed, market expectations for Fed rate cuts have retreated.
Goldman Sachs said the chances of no rate cuts this year, and even next year, have increased. In a report, the bank pushed back its previous forecasts for rate cuts in December 2026 and March 2027 to June 2027 and December 2027, respectively. That suggests the benchmark rate could remain at its current level for more than a year and a half.
Goldman Sachs also raised its estimate of the Fed's chance of hiking rates from 10% to 20%. Hawkish comments are also emerging within the Fed. Beth Hammack, president of the Federal Reserve Bank of Cleveland, recently said, "If current trends continue, a rate hike could be appropriate," adding, "The labor market is generally balanced, but high inflation is the bigger concern." With upward pressure on energy prices growing and capital demand continuing amid the AI investment boom, some in the market are also raising the possibility of a prolonged period of high rates.
km@fnnews.com Kim Kyung-min Reporter