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Trump Dials Back Fed-Bashing, Seeks a Different Kind of Rate Cut

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(Bloomberg) -- As President Donald Trump lashes out at government agencies across Washington, one of his favorite first-term targets – the Federal Reserve – has been getting a relatively easy ride.

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Things could of course change at any moment. And it’s true that since returning to the White House Trump has called for lower interest rates, criticized the Fed for failing to get a grip on inflation and opined that it’s not much good at regulation. But that’s mild stuff from a president who once called US central bankers “boneheads.”

Notably, Trump described the January decision to hold rates steady – which looks set to be the Fed’s stance for some time — as “the right thing to do.” He hasn’t reprised a first-term wish to sack Chair Jerome Powell. Even an executive order to bring independent agencies to heel carved out an exception for monetary policy. Treasury Secretary Scott Bessent wants to focus on bringing down long-term interest rates, not the overnight ones set by the Fed — and Trump appears to be going along.

The truce is welcome news for investors worried that Trump might erode the autonomy of the world’s most powerful central bank, and thus undermine faith in US markets. It’s also out of step with the new administration’s wrecking-ball approach in so many other areas, from the public sector at home to longstanding alliances abroad.

Market-watchers have two broad explanations. One is that Bessent and other aides like Kevin Hassett — director of the White House National Economic Council — have been a calming influence, persuading Trump to stay out of the Fed’s rates lane and focus on policies closer to the executive branch’s traditional purview.

‘Influence on Boss’

Bessent has been among the most vocal administration officials arguing that lower spending and taxes, aggressive use of tariffs and ramped-up energy production will combine to spur growth, trim budget deficits and lower inflation. This will keep borrowing costs down for businesses and households, they say – pointing to 10-year Treasury yields rather than the Fed’s policy rate as the gauge of success.

“Bessent may be having some influence on his boss in terms of focusing on longer-term rates,” Evercore ISI’s Krishna Guha wrote in a note to clients. “In the near term at least this eases tension between the Fed and the new administration,” and helps put downward pressure on yields.