Trump calls for 2–3% Fed rate cut, claims $800B savings — economists warn inflation risk

- President Donald Trump Advocates for Significant Reduction in Base Interest Rates - Mentions Potential Annual Savings of $800 Billion for the U.S. [Unblock Media] President Donald Trump has sparked waves by advocating for a reduction in the base interest rates by at least 2-3 percentage points. On the 24th (local time), he stated on his social platform 'Truth Social' that by significantly lowering the base interest rates, the U.S. could save over $800 billion annually and could raise them again if the situation worsens later. This statement comes ahead of the Federal Reserve System (Fed)'s monetary policy decisions expected in the latter half of 2025, provoking immediate debate not just in political circles but also within financial markets and the field of economics. The base interest rate is a key tool used by central banks to regulate the economy. Lowering the interest rate reduces loan interest rates, making it easier for businesses and households to access funds, thereby stimulating consumption and investment, and leading to economic stimulation. However, some express concerns that such measures might aid short-term economic recovery but could lead to inflation and asset bubbles in the long term. Paul Krugman, a professor at the City University of New York, said, "Lowering interest rates can boost consumption in the short term, but it might be premature given the current high inflation situation." On the other hand, former Fed Chair Janet Yellen warned, "Excessive interest rate cuts can stimulate inflation expectations and could undermine market confidence." While President Trump claimed that the U.S. could save more than $800 billion per year through interest rate cuts, he did not provide specific calculations to support this claim. Some Republican economic advisers explain that reducing the federal government's interest burden and increasing corporate investment could expand fiscal capacity in the long run, but they have not provided specific figures or execution plans. The Brookings Institution, a Washington-based think tank, cautioned that "to claim savings of hundreds of billions of dollars annually, a clear analysis of interest expenditure and growth rate estimates should accompany the claim," urging for careful examination. Following Trump's statement, U.S. Treasury yields showed a slight decline, reflecting market expectations for interest rate cuts. Investors are closely watching the possibility of the Fed lowering rates within the year, particularly given a slowdown in the labor market and stability in the Consumer Price Index (CPI), which could result in a dovish stance in the September-December FOMC meetings. However, there is also caution that a steep interest rate cut triggered asset market overheating and soaring prices during the 2008 global financial crisis and the 2023 economic slowdown, which might repeat under similar circumstances. Trump’s statement is significant enough not to be dismissed as a mere political message, especially given his strong potential for a second term, which could make this a policy pledge. The discussion on the independence of the Fed could resurface, making future interest rate policies a critical factor in determining the U.S. economy's soft landing. Trump's comments are expected to intensify discussions on the politicization of the base interest rate and the sensitiveness of monetary policies.