2-year US Treasury yield soars as Trump urges Powell to cut rates immediately: Don't wait until the Fed's next meeting!

On Thursday, U.S. President Donald Trump once again called on Federal Reserve Chair Jerome Powell to cut interest rates, stating that in the face of the global economic shock triggered by the Iran conflict, the Fed should take immediate action. Trump posted on social media on Thursday:

“Where is the always-too-late Jerome Powell today? He should cut rates immediately, not wait until the next meeting!”

Trump’s criticism of Powell comes as he faces pressure from the economic fallout of the Middle East conflict. The conflict has driven up oil prices and threatened global supply chains. U.S. consumers’ dissatisfaction with living costs continues to rise, which is not favorable for the Republican Party’s prospects of maintaining control of Congress in the November midterm elections.

Trump has already chosen former Federal Reserve Governor Kevin Warsh to succeed Powell, whose term as Fed Chair ends in May. However, due to an investigation by the U.S. Department of Justice into the Fed, this nomination has become entangled in political deadlock.

U.S. Republican Senator Thom Tillis said he would block any Fed nominations from Trump, including Warsh, until the investigation into Powell, which he considers politically motivated, is withdrawn. Earlier this week, after meeting with Warsh, Tillis praised his abilities but stated he would still oppose the Fed nomination.

For a long time, Trump has pressured Powell to cut rates sharply, expressing his desire for a leader who will actively lower borrowing costs at the Fed.

Although market expectations suggest that Fed officials will keep rates unchanged at next week’s meeting, soaring oil prices are complicating the outlook for monetary policy. Currently, U.S. inflation remains above the Fed’s 2% target.

U.S. Consumer Price Index (CPI) data shows that inflation in January and February increased only slightly, but these figures do not yet reflect the recent rise in oil prices. Recently, oil prices surged above $100 per barrel. The spike in oil prices is expected to limit the Fed’s room to cut rates in the short term.

Traders have significantly reduced their bets on rate cuts this year. On Thursday, at the close in New York, the yield on the 10-year U.S. Treasury rose over 3.30 basis points to a daily high of 4.2746%, after briefly hitting a daily low of 4.2082% at 19:41 Beijing time. The 2-year Treasury yield increased over 10 basis points, reaching a daily high of 3.7637%. The 30-year Treasury yield fell 0.30 basis points to 4.8755%.

Meanwhile, economists say that if oil prices remain high, the impact on consumers and businesses could ultimately force the Fed to restart a rate-cutting cycle.

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