Trump’s Mega-Rate Cut Gambit Could Carry Unintended Consequences

The Situation Donald Trump and a growing faction of Republicans are pressing the Federal Reserve to slash rates dramatically—and soon. There’s a case to be made for modest cuts, but current economic indicators don’t signal that the Fed’s stance is wildly misaligned with fundamentals. Any Fed chair appointed under a new administration would still have to win over the eleven other members of the Federal Open Market Committee. Convincing them that emergency-level cuts are warranted in the absence of a crisis is no simple task. The Risk of Perception The kind of large-scale reductions Trump is advocating—at a moment when the economy is broadly balanced—could actually drive long-term borrowing costs higher if markets interpret the move as driven by politics…