Trump Demands World's Lowest Interest Rates as Fed Poised to Hike, Setting Up Clash with Warsh

President Donald Trump on Sunday called for the United States to have the world's lowest interest rates, directly challenging the Federal Reserve days before a policy meeting at which traders see an 86% probability of a rate increase.

Speaking to reporters at the Irish Open golf tournament in Doonbeg, Ireland, Trump said he did not know what the Fed would do at its Federal Open Market Committee meeting concluding Wednesday, but argued the U.S. "should be paying the lowest interest rate in the world" regardless of economic data.

The demand lands as the Fed confronts fresh evidence of persistent inflation. The Labor Department's Consumer Price Index on Friday posted its largest increase in four months, reinforcing expectations that the central bank will raise its federal funds rate target range, currently at 3.5% to 3.75%. Price pressures remain elevated due to Trump's import tax increases and surging energy prices tied to the Iran war, according to multiple reports.

Trump linked his call for lower rates directly to U.S. credit strength. "I know more about formulas than anybody, and with the best credit in the world, we make other countries rich," he said. He warned that the advantage could be withdrawn, saying, according to a report: "We could turn that off in two minutes."

The president has made his demands on the Fed increasingly explicit. Two weeks ago he posted on social media: "LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT." On Sunday, he reiterated that threat, saying: "We don't want to have deficits with nations. We want to have surpluses or at least break-evens."

National Economic Council Director Kevin Hassett, speaking on "Fox News Sunday," said Trump "will defend the independence of Kevin Warsh above all" no matter what the Fed decides. But Hassett added that if the Fed raises rates, "I'm sure he's not going to be super happy about it." In a separate report, Hassett played down the trade-war threat, saying: "I don't expect the trade's going to go to zero," while acknowledging the president holds a strong opinion on rates.

The Fed's meeting comes weeks before midterm elections that will determine whether Republicans keep their slim majorities in both chambers of Congress. A rate hike could add to voter concerns about affordability, according to recent Reuters/Ipsos polls. Trump's approval ratings have fallen as inflation has persisted.

Fed Chair Kevin Warsh, Trump's own appointee who took charge earlier this year, has not faced the same level of public criticism that Trump directed at former Chair Jay Powell. But the president has signaled frustration with the Fed's stance, and a report noted that Trump has suggested Warsh's options may be limited by what the president called a "very political" board of governors.

After the central bank reiterated its 2% inflation target last month, Warsh now faces a test. "Warsh is now in the position to either vindicate his own views or reignite the debate about what is truly motivating him," a CNBC analyst wrote, according to a report, warning that uncertainty "would likely raise the yield on long-term debt."

Traders have already priced in two rate increases by the end of the year, according to a report, as surging crude oil and Treasury yields reinforce the hawkish outlook. The hotter-than-expected August inflation reading and an unexpectedly strong jobs report have prompted the market to assign an 86% chance of a September move.

Trump, who has long argued that Fed rate levels have benefited other countries at the expense of the United States, focused Sunday on America's credit position rather than offering a specific rate forecast, but made his preference unambiguous. "The United States is so strong, we should be paying the lowest interest rate in the world, regardless of their formulas," he said.