President Donald Trump has strongly urged Federal Reserve Chairman Jerome Powell to lower interest rates, highlighting concerns about the U.S. monetary competitiveness. On July 22, White House Press Secretary Karoline Leavitt confirmed the administration's stance at a press briefing.
This development highlights the intersection of politics and monetary policy, with pressure forcing Powell to comply with directives from the executive branch, influencing financial markets and potentially the allocation of cryptocurrencies globally.
Trump's Interest Rate Request Shakes Economic Confidence
President Trump's request to lower interest rates targets Federal Reserve Chairman Jerome Powell, highlighted by a strong message calling for immediate action to maintain the economic competitiveness of the United States. Trump's directive aims to address perceived disadvantages compared to peer economies due to the current policy interest rates, which are at 4.25%–4.5%. Karoline Leavitt asserts that the administration is not concerned about the budget deficit from tax cuts, while also pushing for deregulation and a significant tax bill.
Potential financial changes could occur with immediate impacts across the financial markets. Lowering interest rates could affect the allocation of risk assets, with historically positive effects on cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). Leavitt's endorsement once again reaffirms Trump's hardline stance on achieving these monetary goals.
"Jerome, as usual, you are too late. You have cost America a significant amount of money and continue to do so. You should lower interest rates significantly. Hundreds of billions of dollars are being lost without any inflation." — Donald Trump
The Cryptocurrency Market Ready to React to Fed's Decisions
Did you know? In previous instances when the Fed faced pressure from the executive branch during the period of 2018-2020, Bitcoin and Ethereum often reacted by increasing in price amid dovish signals, while also showing volatility before rate hike expectations.
Current data for Bitcoin shows its price at $116,729.45 with a market capitalization of $2.32 trillion and a market dominance of 59.63%, according to CoinMarketCap. Although down 1.43% in 24 hours, BTC has shown resilience, increasing 27.73% over the last 90 days. Trading volume surged by 34.46% in the day.
Research indicates potential impacts on financial strategies and risk asset trends if interest rate cuts coincide with declines in traditional yields. This trend could encourage additional allocations to BTC and ETH, considering previous reactions to dovish policies. The impact on Layer 1 assets and DeFi could also lead to increased market volatility.