Trump Urges the Fed to Cut Interest Rates: Can Loose Economic Policies Inject a Boost into the Market?
On March 19 (US time), the Fed concluded its two-day monetary policy meeting and announced that it would maintain the federal funds rate target range at 4.25% to 4.50%, in line with market expectations. However, it is worth noting that the Fed simultaneously announced a substantial slowdown in Quantitative Tightening (QT). Starting from April, the monthly reduction of the balance sheet will drop sharply from $25 billion to $5 billion. This signal has been interpreted by the market as a subtle shift in the Fed’s monetary policy, significantly reducing the intensity of liquidity tightening.
As a result, financial markets responded swiftly. The crypto market showed particular strength, with Bitcoin (BTC) climbing to $87,400 and Ethereum (ETH) strongly breaking through the $2,000 mark. The total crypto market capitalization reached $2.81 trillion, up 3.51% from the previous day.
Moreover, traditional stock markets also experienced gains. The S&P 500 rose by 1.07%, the Nasdaq gained 1.4%, and the Dow Jones Industrial Average (DJIA) increased by 0.92%, reflecting an improvement in investor sentiment.
Trump Puts Pressure on the Fed: Rate Cuts Urgently Needed
On March 20, U.S. President Donald Trump made a bold statement on social media platform Truth Social, explicitly demanding that the Fed cut interest rates immediately. He argued that the current high-interest-rate policy is a continuation of “Bidenflation”. In his post, Trump wrote:“As U.S. tariffs start to impact the economy (slowdown!), the Fed had better cut interest rates. Do the right thing. April 2 is America’s Liberation Day.”
Trump’s remarks reignited market debates over the possibility of future Fed rate cuts. On March 21, Trump posted again, saying:“Egg prices have dropped significantly from the Biden-induced highs of a few weeks ago. ‘Groceries’ and gas prices are also down. Now, if the Fed could do the right thing and lower rates, that would be great.”
Trump’s core logic is that a Fed rate cut would reduce government debt costs while complementing tariff policies to boost manufacturing reshoring. However, economists remain cautious about this view. Fitch Ratings pointed out that Trump’s tariff policies could actually push up inflation, forcing the Fed to maintain high interest rates, thereby affecting market expectations.
Dovish Signal from the Fed: Short-Term Market Boost
Fed Chair Jerome Powell stated at a press conference that the U.S. economic outlook remains highly uncertain and emphasized that the Fed will “adopt appropriate policies based on economic data”. Notably, the Fed removed the phrase “the risks to achieving employment and inflation objectives are roughly balanced” from its statement and raised the 2025 core PCE inflation forecast to 2.8%. This indicates that the Fed’s confidence in the economic outlook may have weakened, though it did not make a direct commitment to rate cuts.
Market analysts believe that the Fed’s current policy stance remains cautious, making it unlikely that large-scale rate cuts will occur in the short term. However, the slowdown in Quantitative Tightening (QT) undoubtedly signals a loosening of policy, bringing short-term liquidity improvement to the market.
Crypto Market Reaction: Bitcoin Briefly Breaks $87,000
Driven by the Fed’s decision, the crypto market experienced a strong surge. Bitcoin (BTC) briefly broke through the $87,000 mark, while Ethereum (ETH) successfully reclaimed the $2,000 level, signaling a robust recovery across the market. Although Bitcoin’s price has slightly retreated due to market volatility, the positive impact of the news remains undeniable.
Additionally, the inflow of institutional funds further fueled the market’s upward momentum. According to statistics, Bitcoin ETFs have seen net inflows for three consecutive days this week, totaling approximately $500 million, indicating that institutional investors are repositioning themselves in the crypto market.
Data from Coinglass shows that funding rates on major exchanges have returned to neutral, no longer displaying a bearish consensus, yet not fully shifting to a bullish stance either.
Meanwhile, some industry insiders caution that the market may still face short-term volatility. Arthur Hayes, co-founder of BitMEX, commented on social media:“The bottom for Bitcoin may have formed around $77,000, but until Powell fully supports Trump’s fiscal policies, the market could still face increased pressure.”
April Becomes a Critical Turning Point
In the short term, the Fed’s policy shift has provided a certain level of support to the market. However, whether it is sufficient to drive a sustained upward trend remains uncertain and will depend on further economic data. April will become a critical turning point, as several key factors are expected to impact the market trajectory:
U.S. Q1 GDP Data Release: If economic growth falls short of expectations, the Fed may consider adopting looser policies earlier.
Inflation Data: If core PCE inflation remains elevated, expectations for a Fed rate cut may be further delayed.
Impact of Tariff Policies: It remains to be seen whether Trump’s proposed tariff measures can truly boost the economy.
Post-DAS Conference Effects: If Trump’s team introduces clear crypto-friendly policies, it could further stimulate the market.
Overall, the Fed’s dovish signal has injected a short-term boost into the market, but the long-term trend will still depend on the macroeconomic environment and policy execution. Investors should remain cautious and closely monitor the Fed, government policies, and market dynamics to develop more resilient investment strategies.
