White House CEA Chair: Fed Hike Today Would Be a Mistake

Christopher Phelan, chairman of the White House Council of Economic Advisers, urged the Federal Reserve to hold interest rates as the Federal Open Market Committee meets this week. He pointed to recent Consumer Price Index and Personal Consumption Expenditures readings that he says have trended lower over the past three months and do not justify higher borrowing costs.

In a televised interview, Phelan highlighted three months of easing across major inflation gauges and noted the Fed chose not to tighten policy when inflation was higher several months ago. He argued that pattern makes a rate increase at this meeting harder to justify.

Phelan also referenced public calls from President Donald Trump for lower interest rates, saying a hike would run counter to that position and would be unnecessary given the recent data.

Markets have been pricing in a greater chance of a rate increase this week. Higher short-term interest rates tend to make bonds and other yield-bearing investments more attractive relative to non-yielding assets, which can pressure prices for risk assets such as cryptocurrencies. Some investors expect the FOMC to be split again after a recent meeting produced a nine-to-three vote to hold rates.

Phelan pushed back against Fed officials who have said more work is needed to bring inflation down, arguing the downward trend in the readings calls for patience rather than immediate tightening. He commented, “No matter how you measure it, inflation is coming down. They didn’t choose to raise rates three months ago when inflation was higher. It doesn’t make sense to raise rates now in my view.”

The FOMC sets the federal funds rate at scheduled meetings and usually follows the decision with a press conference by the Fed chair explaining the committee’s outlook. A rate increase would raise short-term borrowing costs across the economy and could affect consumer spending and business investment. Signals of a divided committee or a shift toward tighter policy typically influence bond yields, stock prices and cryptocurrencies.

Investors and analysts will focus on the Fed chair’s statement and the post-meeting press conference for clues about how members weigh recent inflation data against longer-term risks. The vote outcome and the tone of the Fed’s communication will shape market expectations for policy for the remainder of the year.