Trump threatens partial trade stop unless Fed lowers base rate

US President Donald Trump has threatened to halt trade with certain countries should the US Federal Reserve fail to ease its monetary policy.

"LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT," Trump wrote on his Truth Social platform on Friday.

Trump argued that the labour market had grown significantly more strongly than expected and that this was sufficient to justify lower interest rates. Economists point out, however, that a strong labour market can fuel wage growth and thus also heighten the risk of inflation.

Trump failed to mention that inflation in his country has been above the Fed's 2% target for more than five years. The US president also left unclear what connection he sees between the desired interest rate cut in the US and the trade deficit with certain countries.

Labour market strong recently

Lower interest rates can help companies grow more quickly. At the same time, they fuel inflation.

Fed Governor Kevin Warsh recently made it clear that he gives higher priority to price stability and has signalled a willingness to raise interest rates. New inflation figures for the US are due to be published next Friday.

Prior to this, the US Department of Labor had released a surprisingly strong labour market report for August. The number of people in employment rose by 162,000, while economists had forecast an average of just 55,000 new jobs. In July, the labour market was still disappointing.