Former President Trump stated that if the economy performs well, he expects his new Federal Reserve chair to cut interest rates, signaling his strong preference for a nominee committed to lowering borrowing costs as he prepares to announce Jerome Powell's successor.
On Tuesday (December 23), Trump wrote on social media: "I want my new Fed chair to cut rates when the market is doing well, not disrupt it without reason. Anyone who disagrees with me won’t be the Fed chair!"
Challenging the "Good News is Bad News" Paradox Trump has repeatedly expressed his intent to break the recent trend where strong economic data sometimes triggers sell-offs due to market concerns about inflation and potential Fed rate hikes.
He wrote: "In the past, good news made markets rise. Now, good news makes markets fall because everyone expects rates to rise immediately to counter potential inflation."
Market Moves Defy Theory However, Tuesday’s market action contradicted the president’s narrative. The U.S. Bureau of Economic Analysis reported that Q3 inflation-adjusted GDP grew at an annualized rate of 4.3%, exceeding market expectations.
Marshall Front, Senior Managing Director at Front Barnett, noted that this "good news is bad news" paradox dates back decades. In an interview, Front said: "Rational minds will prevail, and data will ultimately shape interpretations. Wall Street focuses on economic fundamentals. A solid foundation supports corporate profits, which matter most to Wall Street."
Political Pressure for Rate Cuts Trump’s latest remarks come as he seeks a new Fed leadership to help lower borrowing costs amid growing political pressure to address voter concerns about affordability.
He has repeatedly argued that rate cuts benefit the housing market and wants his eventual Fed pick to consult him on rate decisions.
Shortlist Emerges Last week, Trump said he had narrowed the Fed chair nominee list to "three or four" candidates, with a decision expected soon and an announcement in "the coming weeks."
He revealed that National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh are top contenders. He also interviewed and praised Fed Governor Christopher Waller, stating: "I think each of them is qualified."
Policy Divisions and Rate Cut Goals Earlier this month, the Fed cut its benchmark rate to 3.5%-3.75%, marking the third consecutive reduction. Three Fed officials dissented, and the FOMC remains divided on further cuts. Trump has previously called for rates to fall to around 1% or lower.
Hassett: U.S. Lagging in Rate Cuts National Economic Council Director Kevin Hassett said Tuesday the Fed isn’t cutting rates fast enough despite Q3 growth far exceeding expectations.
Hassett, a leading candidate for Fed chair, argued that AI-driven growth is boosting the economy while exerting downward pressure on inflation.
He noted: "Globally, the U.S. is far behind in rate cuts, even as growth outpaces expectations." Last week, Hassett emphasized the Fed’s independence as "critical."
Downward Pressure on the Dollar Fundamentally, the policy direction—political forces pushing for faster, deeper cuts amid strong growth—weighs negatively on the dollar in the near-to-medium term. Key transmission channels include: rising policy uncertainty → aggressive rate cut expectations → narrowing U.S. yield advantage → reduced dollar asset appeal.
On Wednesday, the dollar index extended losses to 97.74, its lowest since October 3. Markets broadly view Fed independence and data-driven prudence as pillars of currency stability. Excessive political interference could undermine confidence in U.S. monetary policy credibility, triggering capital outflows and depreciation pressure.
Long-term effects hinge on whether this path avoids inflation resurgence. If inflation flares or credibility erodes, deeper dollar declines may follow. While markets have partially priced in cuts, further "politicized" signals or "catch-up" rhetoric from Fed appointments/statements could spark renewed selling.
(Chart: Dollar Index Daily, Source: EasyForex) As of 14:04 Beijing time, the dollar index traded at 97.81.
