‘1% or less’: Trump demands rate cut after US Fed raises interest rates for first time since 2023

US President Donald Trump has called for a dramatic reduction in interest rates, hours after the Federal Reserve increased borrowing costs for the first time in more than three years.In a post on social media on Wednesday, Trump said US interest rates should be “1%, or less”, arguing that the American economy was attracting fresh investment and had strong credit credentials. He followed it with a demand for rates to be lowered “fast”.

Remark comes after Fed Reserve raised benchmarkTrump’s remarks came shortly after the US Federal Reserve raised its benchmark federal funds rate by 25 basis points to a range of 3.75% to 4%. The decision was unanimous and marked the first rate increase since July 2023, Bloomberg reported.The move puts the central bank at odds with Trump's repeated calls for cheaper borrowing. It also puts renewed focus on his relationship with Fed Chair Kevin Warsh, whom Trump appointed earlier this year.Warsh defended the decision, pointing to persistent inflationary pressures.

The Fed has indicated that price growth remains too high, while economic activity and the labour market have remained relatively resilient. Officials have also signalled that another increase could come later this year, Bloomberg reported. The backdrop has become more complicated for US policymakers. Higher energy prices linked to the ongoing US-Israel conflict with Iran have added to inflationary pressures, while Trump's tariff policies have also contributed to uncertainty over the outlook for prices.

Reuters reported that tariffs, the energy shock and strong capital spending linked to the artificial-intelligence boom have all kept price pressures elevated, the Bloomberg report further read. Warsh has also stressed the importance of the Federal Reserve maintaining its independence. His support for the rate increase is significant because Trump had repeatedly criticised his predecessor, Jerome Powell, for not cutting rates aggressively enough.Trump's latest comments did not directly attack Warsh by name.

However, the sharp difference between the president's preferred policy and the Fed's latest decision highlights the pressure facing the central bank as it attempts to bring inflation under control, the Bloomberg report said. For American households, higher interest rates can eventually translate into more expensive borrowing, including for mortgages, car loans and credit cards. At the same time, savers may benefit from higher returns on some deposits and fixed-income instruments.