Trump says rate cuts are a litmus test for new Fed Chairman

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President Donald Trump said the lowering of interest rates is a litmus test for his choice to become the next Federal Reserve chair.

In a wide-ranging interview with Politico, Trump was asked directly whether his next Fed pick must move quickly to bring down borrowing costs.

"Yes," Trump replied when asked if it is a "litmus test that the new chair lower interest rates immediately," signaling he wants a decisive break from the current approach at the central bank.


Trump also took fresh aim at current Fed leadership, arguing the economy is "fighting through interest rates" and contending the sitting chair, Jerome Powell, has been a drag on growth and affordability.

The president framed rate cuts as central to restoring household breathing room, especially for homebuyers, while also casting his broader agenda as one designed to drive investment and jobs.

Reuters reported that the Fed's meeting this week is expected to deliver a quarter-point cut, but the language in the statement and updated projections could reveal whether policymakers are prepared to keep cutting or are turning more cautious amid persistent inflation concerns.

That dynamic could leave the next chair inheriting a divided committee and stepping into the same political crosswinds Powell has faced, with pressure from Trump to lower rates even as some forecasters expect inflation to remain sticky.

The White House argument is straightforward: Americans feel squeezed, and interest costs amplify the pain.

Mortgage rates, auto loans, and credit cards all hit family budgets, and Trump has repeatedly said lower rates are a key lever to make the "affordability" problem more manageable.

In the Politico interview, Trump pointed to what he called a surge in investment and a stronger outlook tied to his policies, insisting the economy is positioned to boom if the Fed stops holding it back.


But Reuters cautioned that faster or deeper cuts could carry risk. If the Fed eases too aggressively, it could stoke demand, reignite inflation pressures, and even push longer-term yields higher — a scenario that would work against the housing market by keeping mortgage rates elevated.

Economists quoted by Reuters said policy ultimately depends on economic conditions, not politics, and some predict only limited room for cuts if inflation remains above the Fed's 2% target.

Still, Trump's message to markets, and to would-be Fed chair contenders, is clear: He expects action.

With Powell's term ending in May and Trump signaling he'll name a successor early next year, the fight over the Fed's direction is quickly becoming a defining economic story heading into the next election cycle.

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