Donald Trump has called for the US Federal Reserve to cut interest rates despite official figures showing inflation in the world’s largest economy increased for the fourth month in a row.
The US president said lower borrowing costs would complement his upcoming tariff policies, days after he announced a 25pc levy on all steel and aluminium imports coming into America.
Mr Trump’s plea looks likely to fall on deaf ears after official data showed that inflation rose to 3pc in January.
Meanwhile, Jerome Powell, the Federal Reserve’s chairman, said on Tuesday that the US central bank is in no rush to cut interest rates again .
The US consumer prices index (CPI) had been expected to remain at the 2.9pc recorded in December.
However, it was pushed higher by the rising cost of groceries, fuel and used cars.
Inflation has climbed steadily since falling to a three-and-a-half year low of 2.4pc in September, leading traders to push back their bets on interest rate cuts.
Money markets indicate that the Fed will not lower borrowing costs again until as late as December, having previously projected cuts in September before the latest inflation figures.
US stocks dropped at the opening bell on Wall Street, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all falling about 1pc.
The CPI data also sent the cost of US government borrowing higher, with the 10-year Treasury yield rising 10 basis points to 4.63pc on bond markets.
It helped send the value of the dollar higher, with the pound down 0.4pc against the US currency to less than $1.24.
Paul Ashworth, of Capital Economics, said the rise in inflation “takes rate cuts off the table this year”.
But Mr Trump wrote on his Truth Social platform: “Interest rates should be lowered, something which would go hand in hand with upcoming tariffs!
“Let’s rock and roll, America!”
He added: “Biden inflation up!”
Mr Trump has previously suggested that he would like to set interest rates himself, threatening to oust the Fed chairman. However, experts have suggested the president would not have the legal authority to remove him, while Mr Trump said in December he had no plans to replace Mr Powell. Mr Trump appointed Mr Powell to the post in 2018.
On Tuesday, Mr Powell said there was no need to lower borrowing costs as the American economy is “strong overall”.
He told a Senate banking committee hearing: “We do not need to be in a hurry to adjust our policy stance.
“We know that reducing policy restraint too fast or too much could hinder progress on inflation.”
Mr Powell also referenced the “risks and uncertainties” the economy faces as the new Trump administration imposes broad new import taxes.
Many economists believe tariffs risk stoking inflation.
Lindsay James, of Quilter Investors, said: “Trump’s policies of tariffs, tax cuts, deregulation and deportation are all expected to be inflationary to varying extents.
“A suggestion that the Fed could look through a one-off step change that could come from tariffs seems unlikely.”
Richard Flynn, managing director at Charles Schwab UK, added: “Tariffs put the Fed in a tough place because they can reduce growth and create joblessness but can also be inflationary.
“The Fed might be more prone to wait things out and see where the dust settles rather than making a move before it’s sure what tariff policy will be and how long it will last.
“As a result, we do not expect a change in interest rate policy for at least the first half of 2025.”
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