Trump told TIME that the Federal Reserve should not raise interest rates again this year, arguing that higher rates make the federal debt harder to reduce and that the way out is growth. He said the United States had never had growth like the current period, and that it was not only artificial intelligence driving it. The next meeting of the Federal Open Market Committee is scheduled for 27 and 28 October, and softer than expected August inflation data had already reduced market expectations of another increase.
Treasury Secretary Scott Bessent has made the same case in blunter terms, arguing that the world has been flooded with debt since the financial crisis and the pandemic, and that the only way out is growth.
On the other side of the argument, the Fed’s own projections put 2026 PCE inflation at 3.7 per cent, and it raised rates in September for the first time in three years.
The disagreement is not really about whether growth helps. It obviously does. The disagreement is about whether you can choose it.
A debt burden has two moving parts, and only one of them is yours. The numerator is what you owe and what it costs to service. The denominator is what you earn. Growing the denominator is the pleasant solution and it is the one every borrower reaches for first, from a government down to a corner shop. The uncomfortable arithmetic is that the rate on the numerator is set by somebody else, and it tends to rise for exactly the reasons that make growth harder.
Anyone who has carried a business loan through a tightening cycle knows how this feels from the inside. The plan is to trade your way out. More covers, longer hours, a second site, a push on the catering side. The plan is not wrong. It is simply running against a number you do not control, and in a year when the rate moves by two points, the extra trading has to beat the extra interest before a single pound of the principal moves.
The thing that makes the growth argument genuinely strong is that supply-side improvement does exist. Productivity gains, investment and capacity expansion can raise output without pulling prices up with it, and if that is what is happening then faster nominal growth really does ease the debt burden without stoking inflation. The thing that makes the counter-argument strong is that when demand persistently outruns capacity, prices and wages move, and the central bank’s job description says it has to respond.
This year the referee has been energy. Oil has driven inflation expectations and pushed yields to levels not seen in nearly two decades, which is a cost increase arriving from outside the economy entirely, and no amount of domestic growth argument makes a closed shipping lane cheaper.
Trump has said an eventual Iran deal could bring oil prices down.
That may be the most consequential line in the whole exchange, because it points at the one variable capable of settling the argument for both sides at once.
