New Trump threat a welcome break for Warsh?

By Sohail Khan 8 September 2026, 12:12 pm

Benchmarks
Nifty23,650.05-129.11

Precious Metal
Gold (MCX) (Rs/10g.)152,886.0068.0

Enter search text:

Business News›News›International›Business›Trump's latest threat just baffled one and all, but it could turn out to be a major gift to Fed's Kevin Warsh

Read Today's Paper

Trump's latest threat just baffled one and all, but it could turn out to be a major gift to Fed's Kevin Warsh
Synopsis

President Trump’s remarks about US interest rates in relation to trade sparked confusion among market experts. Fed Chair Kevin Warsh, though, can use this opportunity to reinforce his independence. By pushing for a rate hike, Warsh could enhance his reputation and insulate himself from the perception of White House's influence, while also reaffirming the Fed's commitment to controlling inflation.

Trump's baffling Fed threat could be gift to Warsh — President Donald Trump and Federal Reserve Chairman Kevin Warsh

LONDON: Donald Trump's unfathomable link between U.S. interest rate policy and trade ties with America's biggest partners led to more head-scratching than market impact. But the strangeness of the president's take offers Federal Reserve Chair Kevin Warsh an opportunity to convincingly distance himself from the White House and bolster his credibility by pushing for a Fed rate rise this month.

Friday should have been a reasonably good day for the president on the economy. After all, August U.S. payroll gains were triple the forecasts, and much of the soft summer jobs picture was revised away as well. Diesel prices did hit a record high earlier in the day, potentially putting upward pressure on inflation. But tepid wage gains from the employment report could just as easily be read as another reason for the Fed to stand pat on rates as it awaits an inflation update this Friday – just days before its next meeting.

Trump needed some good economic news. Just two months ahead of midterm congressional ‌elections, his overall approval ratings are stuck ⁠at the ⁠lowest point of his two terms in office, with 71% of Americans – including four in 10 Republicans – disapproving of his record on the cost of living.

However, instead of staying focussed on the positive August jobs readout, Trump quickly, and somewhat inexplicably, turned to the Fed, telling the central bank what it should do and threatening what he would do if it didn't follow suit.

"High interest rates put the U.S.A. at a very unfair disadvantage, and I won't allow that to happen!" Trump wrote on his Truth Social site, while extolling Warsh as "great". "We should have the LOWEST RATE of any country in the World … LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT," Trump added.

Also read | Hormuz traffic slows as Iran threatens US retaliation

The main problem with this argument is that it makes no sense. Even commentators typically supportive of the president either gave up trying to work it out or just ignored it altogether. This apparent dismissal is somewhat remarkable given the market's concern over the president's relentless political pressure on the central bank over the past 18 months, including his willingness to use political appointments to force it onside.

Trump has repeatedly called for sharp interest rate cuts throughout his second term and threatened to fire ⁠Warsh's predecessor Jerome ‌Powell on numerous occasions for not doing so. He has also regularly questioned why America's economic strength should not also see it have the lowest interest rates in the world, even though most economists would balk at the idea that borrowing costs should be cheaper for a fast-growing economy – it would typically be the other way around given the inflationary implications of a go-go economy.

More importantly, with core inflation above ⁠the Fed's target 2% now for 65 straight months, growth quickening, financial conditions loose and full employment effectively still in the bag, virtually no one thinks the Fed should be cutting rates right now. Even those who think that the September rate hike, that's currently more than 50% priced into futures markets, may be a tad premature.

Also read | Canada's retaliatory tariffs take effect as US trade talks stall

Even if you agree with the call to lower interest rates now, despite the cost of living issues, linking the Fed's hesitation to do so with a threat to halt trade with foreign countries left most pundits and investors questioning whether the president had a grip on the basics.

'CLUELESS' OR 'SOCK PUPPET'?

Perhaps Friday's post was just a hurried way of reintroducing the latest salvo in Trump's trade tariffs campaign. But even then, deliberately weakening foreign economies by cutting off their imports via tariff or decree would likely push them to lower interest rates while also potentially spurring import prices higher stateside. And that won't deliver America the lowest interest rates on the planet.

The lack of market reaction to Trump's latest Fed jibe may indicate that investors are becoming more sceptical of and circumspect about the president's more outlandish posts. Trump's recent claim to have blown Iran's Kharg Island oil hub "to smithereens" turned out to be plainly false, for example.

So where ‌does this leave Kevin Warsh? Trump's appointee has struggled to establish his own credibility since taking office in May, as concerns about political pressure from the White House have dogged him.

However, Warsh seemed to lean decidedly hawkish in his recent keynote speech in Jackson Hole.

Delivering a rate rise now would not only underscore the Fed's commitment to its inflation target, regardless of small moves in this week's consumer price inflation trends, but it could also confirm Warsh's control of the central bank ⁠and help distance him from the president.

"One 25bps hike is good PR. It kills this credibility narrative and ends months of speculation about whether Warsh is a sock puppet," wrote TS Lombard economist Dario Perkins, pointing out that over the past 50 years, only Janet Yellen did not lift rates within two months of taking over as Fed chair.

A perception that the Fed and its current boss are being cowed by a White House with "difficult to explain" views is greater than any downside from a quarter-point hike. Indeed, a hike now may even help bring down long-term bond borrowing rates, which arguably have a greater economic impact than the policy rate, by re-asserting the Fed's inflation-fighting credentials and taking some of the pressure off Treasury Secretary Scott Bessent.

"Warsh will be credible when Trump starts calling him an idiot!" Perkins added.

For now, Warsh still seems to be "great" in the eyes of the president. But it only took Trump a year to go from praising the "considerable talent" of Powell to branding him "clueless" when rates continued to climb. Warsh has big choices to make – even if they do risk the ire of the man who appointed him.

The opinions expressed here are those of Mike Dolan, a columnist for Reuters.

Add as a Reliable and Trusted News Source
Add Now!

(You can now subscribe to our WhatsApp channel)

(You can now subscribe to our WhatsApp channel)

Read More News on
trumptrump fed statementUS fedwarsh fedUS interest ratekevin warshdonald trumpUS rate cutUS rate hike

Enter search text:

Continue reading with one of these options:
Limited Access
Free
Login to get access to some exclusive stories

& personalised newsletters
Login Now

Unlimited Access
Starting @ Rs120/month
Get access to exclusive stories, expert opinions &

in-depth stock reports
Subscribe Now

Unlock Access to All Exclusives with ETPrime FREE TRIAL

15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers

Trial offer expiring in00 : 05 : 00

I'd rather pay ₹2599 now

Uh-oh! This is an exclusive story available for selected readers only.

Worry not. You’re just a step away.

Prime Account Detected!

It seems like you're already an ETPrime member with

Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.

Unlock ETPrime's Exclusive Stories Today!

Subscribe to gain powerful insights on business, stock market and industry trends.

Big Price Drop! Flat 40% Off

Student Only Offer

Already a Member? Sign In now

Already a Member? Sign In now
Already a Member? Sign In now

Offer Exclusively For You

Save up to Rs. 700/-

ON ET PRIME MEMBERSHIP

Avail Offer

Offer Exclusively For You

Get 1 Year Free

With 1 and 2-Year ET prime membership

Avail Offer

Offer Exclusively For You

Get 1 Year Free

With 1 and 2-Year ET prime membership

Avail Offer

Offer Exclusively For You

Get Flat 40% Off

Then ₹ 1749 for 1 year

Avail Offer

Offer Exclusively For You

ET Prime at ₹ 49 for 1 month

Then ₹ 1749 for 1 year

Avail Offer

Special Offer

Get flat 40% off on ETPrime

Avail Offer
Avail Offer

Claim NowAlready a Member? Sign In now

Need Assistance?

Connect with an ETPrime expert for personalized support and guidance

+91 9484700004

' + h3 + '

' + h4 + '

' + listing + '

What’s Included with

ETPrime Membership

1Exclusive Insights That Matter

Uncover the truth with our investigative stories

Make strategic moves using the real-world case studies

Read industry-specific stories to identify emerging trends

Spot opportunities with in-depth insights that matter

Trump temper on H-1B visas is forcing Indians to do these things to stay put in US

What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.

Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?

The problem with lab grown diamonds
Why a falling rupee is a better option for the economy

A list of top 20 momentum stocks that have delivered massive returns in one year