Viewpoint: Trump may force the Federal Reserve to lower interest rates through fiscal tightening

ChainCatcher news, according to Jinshi reports, Nir Kaissar, head of asset management company Unison Advisors, believes that President Trump may ultimately find a way to force the Federal Reserve to lower interest rates: fiscal tightening.

Nir Kaissar stated that in recent years, the influence of fiscal policy has been at least comparable to the historic measures taken by the Federal Reserve. Now, fiscal policy and monetary policy may be about to swap roles. Treasury Secretary Scott Bessent has indicated that the government aims to reduce the deficit to 3% of GDP. This will require Trump's Department of Efficiency (DOGE) to cut spending by $1 trillion. It is still unclear to what extent this goal can be achieved, but the mere threat of spending cuts may already be suppressing market sentiment and hindering economic growth.

By cutting spending, Trump may force monetary policy to ease in support of fiscal tightening. Whether Trump's spending cuts lead to an economic slowdown is almost irrelevant. As long as these cuts (or threats of cuts) occur simultaneously with an economic slowdown, the Federal Reserve may take action.