President Donald Trump stepped up his attacks on the Federal Reserve, demanding a “large cut” in interest rates as the U.S. central bank prepares for a meeting at which it is expected to lower borrowing costs by a quarter point.
“I would like to see a large cut,” he told reporters Tuesday at the White House, making one of his most direct public demands to date of the politically independent central bank and repeating a frequent call that it halt the gradual shrinking of its balance sheet.
“I would like to see immediately the quantitative tightening stop,” he said, adding the stock market and U.S. growth would have been stronger if the central bank had not tightened policy in the past. “I’m just very disappointed in the Fed.”
Policymakers are expected to lower rates for the first time in more than a decade at their two-day meeting in Washington starting Tuesday. They’ve signaled they are open to a quarter-point cut to sustain the record U.S. economic expansion amid headwinds from slowing global growth an uncertainty stemming from Trump’s trade policies.
Economists surveyed by Bloomberg don’t expect the Fed to call an early halt to the balance-sheet roll-off, which is scheduled to end in September.
“If the Fed is successful it will hike rates again before the next recession,” said Constance Hunter, chief economist at KPMG LLP, in her survey response.
Despite the anticipated cut, those polled didn’t expect officials to halt the Fed’s ongoing balance sheet runoff before its scheduled end in September.
Respondents to a July 19-23 poll overwhelmingly chose a quarter-percentage-point rate cut as the most likely outcome of the Federal Open Market Committee gathering. That outcome received a median probability of 80%. A half-point cut garnered a median 10% response, and a decision to leave rates unchanged a median 5%.
In a similar June survey, with international trade disputes casting a shadow over the global economic outlook and inflation staying low, economists were already anticipating a half-point, downward adjustment for rates, with cuts coming in December and July 2020. The median projection from respondents then saw the Fed’s target range remaining at 1.75% to 2% at least through the end of 2021.
Now, after Fed officials signaled a greater willingness to guard against a deeper slowdown, economists anticipate decreases this July and October.
That still doesn’t catch up with financial market sentiment. Pricing in federal funds futures contracts imply that investors expect the Fed to cut its benchmark rate by three-quarters of a percentage point by year’s end.
The FOMC is scheduled to release a statement at 2 p.m. ET on Wednesday. Chairman Jerome Powell will hold a news conference at 2:30 p.m. Officials won’t update their quarterly forecasts, including the dot plot of interest-rate projections, until their next meeting in September.
