President Donald Trump called for interest rate cuts from the Federal Reserve (Fed) and central banks globally on the 23rd. However, the bond market remained calm, showing little reaction to his remarks.

Despite concerns over undermining central bank independence, the lack of significant market response is attributed to Trump’s repeated calls for rate cuts and Fed Chair Jerome Powell’s firm commitment to maintaining the Fed’s independence.

Trump’s Call for Rate Cuts
In a virtual address at the World Economic Forum (WEF), Trump stated, "I will ask Saudi Arabia and OPEC to lower oil prices" and added, "As oil prices fall, I will demand immediate rate cuts. Similarly, rates worldwide should come down to follow us."

Despite Trump’s remarks, the bond market showed minimal reaction. The benchmark 10-year U.S. Treasury yield closed at 4.65%, up 4 basis points (bps) from the previous day. The rate futures market was also indifferent; CME FedWatch indicated a 99.5% probability of the Fed maintaining its current rate at the January 29 meeting, a slight increase from the previous day.

Expectations for rate cuts this year also saw little change. The likelihood of one rate cut by the end of 2024 stood at 33%, down slightly from 35% the previous day.

Trump’s History of Pressuring the Fed
Trump has repeatedly challenged the Fed’s independence during his presidency and election campaigns. In August 2017, he stated, "I think the president should have at least some say there [at the Fed]."

Throughout his term, Trump criticized Powell’s decisions, despite appointing him as Fed Chair in 2017. When the Fed began raising rates post-pandemic, Trump frequently posted his disapproval on social media.

Globally, central bank independence is a standard principle or practice. Trump's remarks have sparked debates about the Fed's autonomy.

Powell’s Commitment to Independence
Wall Street analysts believe Trump’s influence on the Fed remains limited, given Powell’s strong stance on independence. After Trump’s election victory, Powell was asked in a November FOMC press conference if he would resign if requested by Trump. Powell firmly replied, "No."

When asked about the legal authority of a president to dismiss or demote Fed board members, including the chair, Powell stated, "It is not legally permissible." Powell’s term as Fed Chair runs through May 2026.

Investment magazine Barron’s commented, "Such pressure from Trump is unlikely to lead to lower rates, given the president’s limited authority over Fed appointments or decisions."

Market Outlook and Expert Opinions
Dan Ivascyn, Chief Investment Officer at PIMCO, expects the Fed to maintain stable rates until there is more clarity on data and policy impacts. While many policies being introduced could foster long-term growth and productivity, he noted that they might create short-term pressures.

He added, "From an inflation perspective, we’re not out of the woods yet." Ivascyn also cautioned that rising U.S. Treasury yields could impact the stock market, especially given current elevated equity valuations.