100% will cut interest rates. In this game of interest rate cuts, there are actually two factions:
1. Technocratic bureaucrats led by Powell oppose ignoring inflation for interest rate cuts.
2. The MAGA faction of the Republican Party led by Trump hopes to quickly initiate a cycle of interest rate cuts. Technocratic bureaucrats have two fatal weaknesses: 1. Unable to independently compile data, the data basis for interest rate cut or hike decisions comes from departments controlled by Trump; 2. Lack of political leverage, personnel appointments are in Trump's hands, and he controls many levers of the state machine, providing numerous 'irrefutable reasons.' The notion that the Federal Reserve is a private institution is a deception to the general public. As Park Kaka famously said: "My power as president is limitless," it’s just that previous U.S. presidents needed the Federal Reserve to create this façade.
Thus, whether to cut interest rates depends on how determined Trump is to cut rates, or whether the benefits of rate cuts are worth Trump making political trade-offs.
The benefits of interest rate cuts for Trump include:
1. Lower the dollar exchange rate, along with many negotiated zero-tariff conditions with the U.S., reducing the overall trade deficit;
2. Provide a low-interest environment to promote the development of the real economy and facilitate the completion of more national-level projects;
3. Reduce the repayment pressure of U.S. Treasury bonds, freeing up more funds to support various spending projects;
4. Fulfill voter promises and demonstrate the ability to control inflation to gain voter favor for the midterm elections;
5. Create more room for high U.S. stock prices.
The costs of cutting interest rates for Trump include:
1. After the interest rate cut, a portion of the funds that earn interest from U.S. Treasury bonds will inevitably choose to flow out of the U.S.;
2. Inflation may rise again;
3. Low-interest U.S. Treasury bonds may not attract enough buyers.
Overall, the benefits outweigh the drawbacks, and these so-called drawbacks can still be maneuvered in Trump's eyes. For example, the biggest concern is the capital flowing back to emerging markets, but Trump has somewhat solved this issue through Bitcoin and stablecoins. It can create a high-yield, high-risk trading market in a low-interest environment, and this market is still priced in dollars, which can absorb funds from around the world and reduce outflows. As for inflation, Trump can do even more, such as lifting sanctions on Russian oil exports to further lower oil prices; a decrease in oil prices can alleviate inflation issues. Most importantly, the benefits of interest rate cuts align with Trump's core political ideology, providing irrefutable reasons. As for recent various reversals, such as major adjustments in employment data and PPI exceeding expectations, these are actually irrelevant noise, essentially stabilizing market expectations. Just pay attention to the actual actions to understand.
In terms of interest rate cuts, you can see:
1. Federal Reserve Board members Bowman and Waller openly oppose it, still supporting interest rate cuts despite data not supporting this move;
2. Board member Kugler resigns early, returning to Georgetown University as a professor;
3. Trump's very trusted successor to Kugler is Stephen Miland;
4. The data source for the Federal Reserve's interest rate decision is the head of the Bureau of Labor Statistics, who has revealed issues; Trump's nominated successor, Anthony, is an economist in the MAGA circle, singing praises for Trump's various policies. Personnel is indeed politics; how many resources need to be invested and what kind of interest exchanges are required to influence so many core positions? This shows Trump's determination to cut interest rates.
