President Trump criticizes the Fed for sharp interest rate hikes

President Donald Trump has criticized the Federal Reserve's handling of interest rates, calling the rates "too high" in a fiery press conference at his Mar-a-Lago resort. The incumbent accuses the Biden administration of leaving behind an "economic mess", pointing out persistent inflation and the Fed's aggressive monetary policy as the main culprits. #Write2Earn # "We are experiencing a difficult situation," Trump said. "Inflation is still rampant, and interest rates are too high. They are trying to make it even harder for us to overcome this." This only increases our expectations of a confrontation with Fed Chairman Jerome Powell, whose interest rate policy has pushed borrowing costs to the highest level in decades. Inflation Cools Down, But Borrowing Costs Remain High The Federal Reserve has raised interest rates to the highest level in 20 years from March 2022 to July 2023 as inflation peaked at 9.1% in June 2022. Although the Fed has successfully brought inflation down to 2.7% compared to the same period last year in November 2024, it is still higher than the central bank's target of 2%. At the same time, Americans are grappling with the aftermath of those price hikes. Mortgage rates have soared to over 8%, while the yield on 10-year treasury bonds has risen to 4.7%. This has led many to wonder if the Fed is losing control of its playbook. According to tradition, interest rates tend to decrease during the Fed's interest rate cuts cycle. However, since the central bank began cutting interest rates in September 2024, long-term interest rates have moved in the opposite direction, increasing by 110 basis points unprecedentedly. Analysts call this a "market rebellion", as investors fundamentally challenge the Fed's ability to control inflation without causing major economic damage. For borrowers, the situation is very bleak. This week's gambling on high-yield bonds highlights the demand for debt: $58 billion of three-year bonds were sold on Monday, followed by the reopening of $39 billion of 10-year bonds on Tuesday—the largest since 2007. Next up is a 22 billion dollar 30-year bond. Corporations are also quickly securing funding before the market deteriorates, taking advantage of narrow credit spreads and high investment demand. Despite these challenges, Trump has made it clear that he has no intention of firing Powell, whom he described as "politically minded" in his election campaign. Powell's term will not end until 2026 and he has publicly stated that he will not resign even if Trump requests. “I have made a lot of money, so I should at least have a say in monetary policy,” Trump believes. Politicians Profit Handsomely While Retail Investors Struggle While ordinary Americans are struggling with rising interest rates, members of Congress are making money. Lawmakers' stock trading activity outperformed the S&P 500 in 2024, with an average increase of 31% for the Democratic Party and 26% for the Republican Party. To better understand, the S&P 500 increased by 24% during the same period, far outpacing retail investors. According to JPMorgan's data, the average retail investor only achieved a profit of 3.7% last year, with many ending the year in a loss. At least five members of Congress have reported increases of over 100%, with Nancy Pelosi's investment portfolio surging 71% thanks to strong investments in technology stocks. Meanwhile, hedge funds have struggled to keep up, with only two major funds—DE Shaw (+36.1%) and Bridgewater China (+35%)—outperforming Congress. In particular, the Democratic Party has doubled its investment in technology. Nearly half of their investment portfolio is focused on technology stocks, while financial services lag far behind at 13.4%. On the contrary, the Republican Party is more diverse, supporting energy, consumption cycles, and finance along with technology. But Trump plans to ban Congress from trading stocks once and for all when he returns to the Oval Office. The worries of stagnant inflation and the battle against the Fed Economists are currently warning about stagflation - high inflation combined with slow growth - when market dynamics change. Gold prices have risen 29% since March, while the US Dollar Index (DXY) has reached its highest level since the end of 2022. These two assets rarely rise together, but this unusual combination signals that the market is preparing for the return of inflation. "This move in long-term interest rates cannot be ignored," Trump said. "The market is pushing back against the Fed at a historical pace, and inflation is being priced back in." This situation oddly evokes the dot-com bubble, with interest rate fluctuations challenging historical trends. Analysts call this an unprecedented showdown between the Fed and the market, with stakes higher than ever. Borrowers are flooding into the bond market to lock in funding before the situation worsens. The European bond market has set a record, while Wall Street is eyeing a potential $200 billion issuance in January, which will be the largest issuance in history. Retirement funds and insurance companies, with abundant cash, are eagerly seeking high returns despite increasing risks. This demand has pushed corporate bond spreads to their lowest level in 30 years, creating a rare opportunity for issuers. Meanwhile, the Federal Open Market Committee (FOMC) of the Fed will meet at the end of the month, right when Trump takes office. All eyes will be on Powell and his team as they tell us everything they want us to believe about the US economy. DYOR! Write&Earn $BTC {spot}(BTCUSDT)