Trump's demand for low rates faces market resistance

The issue of interest rates has become one of the most controversial topics in the American economy. On one hand, the U.S. president insists on aggressively lowering rates. On the other hand, market participants and economic experts remain skeptical about the feasibility of such plans.

The President’s Ambitious Demand and the Financial Sector’s Cold Response

The U.S. president has expressed a clear position: interest rates in the U.S. should be among the lowest in the world, ideally at 1%. However, this demand faces a significant obstacle. With current inflation around 2%, such a rate would imply negative real interest rates, creating substantial economic risks for the monetary system.

Wall Street’s reaction indicates that market professionals do not share the optimism of the chief economist. According to data published by CNBC in January, surveyed experts forecast only minimal adjustments to the federal funds rate over the next two years. These forecasts align with prices quoted by market participants in the futures market, suggesting that the market doubts the possibility of a large-scale shift in monetary policy.

What the Market Expects: Moderate Cuts Instead of a Revolution

According to market expectations, in 2026, two rate cuts of 25 basis points each are anticipated, totaling 50 basis points. The consensus believes that after this, rate reductions will cease, and no changes are expected in 2027. Thus, the federal funds rate will stabilize at around 3% and remain at this level for the coming years.

This scenario sharply contrasts with the demands made by the president. Instead of a straightforward reduction to 1%, the market forecasts a gradual decrease to 3%, which remains significantly higher than the president’s wish. This gap between demand and reality reflects a deep divergence in views on economic priorities.

The Economic Logic Behind Market Skepticism

The market’s stance is not accidental. Experts understand that a sharp reduction in rates amid 2% inflation would lead to negative real interest rates — a phenomenon typically associated with economic crises rather than stable growth. Such a move could trigger a new wave of price instability and increase risks to the financial system.

The president’s demand, though ambitious, runs into the laws of economic science and the practices of central banks worldwide. The market consensus reflects an understanding that monetary policy should remain tied to real macroeconomic conditions, not political wishes. In this context, moderate rate adjustments appear to be the most realistic scenario in the short term.