Opinion: Trump May Use Fiscal Tightening to Force Fed Rate Cut

BlockBeats News, February 28th, Nir Kaissar, head of asset management company Unison Advisors, believes that President Trump may have finally found a way to compel the Federal Reserve to lower interest rates: fiscal tightening.

Nir Kaissar stated that in recent years, the impact of fiscal policy has been at least as significant as the Fed's historic actions. Now, fiscal policy and monetary policy may be on the verge of swapping roles. Treasury Secretary Scott Bessent has indicated that the government aims to reduce the deficit to 3% of GDP. This would require Trump's Department of Government Efficiency (DOGE) to cut $1 trillion in spending. It is not yet clear to what extent this target can be achieved, but the mere threat of spending cuts may already be dampening market sentiment and hindering economic growth.

Through expenditure cuts, Trump may be pushing for monetary policy to ease in support of fiscal tightening. Whether Trump's spending cuts result in economic slowdown or are inconsequential may not matter. As long as these cuts (or the threat of cuts) coincide with an economic slowdown, the Fed may take action. (Jinse)