Trump's Fiscal Tightening May Influence Federal Reserve's Rate Decisions

According to BlockBeats, Nir Kaissar, head of asset management firm Unison Advisors, suggests that U.S. President Donald Trump may have found a way to compel the Federal Reserve to lower interest rates through fiscal tightening. Kaissar notes that in recent years, the impact of fiscal policy has been at least as significant as the Federal Reserve's historic measures. Currently, fiscal and monetary policies may be on the verge of switching roles. Treasury Secretary Scott Bessent has stated that the government aims to reduce the deficit to 3% of GDP. Achieving this would require Trump's Department of Government Efficiency (DOGE) to cut $1 trillion in spending. While it remains uncertain how much of this target will be met, the mere threat of spending cuts could already be dampening market sentiment and hindering economic growth. By reducing expenditures, Trump might force monetary policy to ease in support of fiscal tightening. Whether these spending cuts lead to an economic slowdown is irrelevant. As long as these cuts, or the threat thereof, coincide with an economic slowdown, the Federal Reserve may be prompted to take action.