Trump's Fed tweets pull interest-rate expectations lower, new study finds

• President Donald Trump has consistently pushed the Federal Reserve to ease monetary policy over the past year.
• New research suggests investors have grown convinced that he would succeed in those efforts.
• Trump's criticism on Twitter trimmed market expectations for interest rates by a tenth of a percentage point overall, according to the research.
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President Donald Trump has consistently pushed the Federal Reserve to ease monetary policy over the past year. New research suggests investors have grown convinced that he would succeed in those efforts.

According to a working paper from the National Bureau of Economic Research, increasingly frequent pressure from the White House has influenced market expectations for interest rates.

"Overall, we find strong evidence that the consistent pressure applied by President Trump to pursue more expansionary monetary policy is manifested in the market expectations of a lower target rate, forecasting a steady erosion in central bank independence over the course of his presidency," the Duke University and London Business School researchers wrote in the paper.

The researchers studied more than a year of Trump's criticism of the Fed, often expressed on Twitter, and found it turned fed funds rates lower. From April 2018, his tweets trimmed market expectations for interest rates by a tenth of a percentage point overall.

"Our findings suggest that market participants believe that the erosion to central bank independence is significant and persistent," the researchers said.

The Fed operates independent from the White House, a dynamic economists say is necessary for a healthy economy and financial markets. But Trump has called for aggressive stimulus measures and sought to put political allies in charge of monetary policy.

"Jay Powell and the Federal Reserve Fail Again," Trump wrote on Twitter last week after the central bank cut interest rates by a quarter percentage point. "No 'guts,' no sense, no vision! A terrible communicator."

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