TechFlow news — On February 28, according to Jinshi Data, Nir Kaissar, head of asset management firm Unison Advisors, believes U.S. President Trump may have ultimately found a way to pressure the Federal Reserve into cutting interest rates: fiscal tightening.
Kaissar said that in recent years, fiscal policy has been at least as impactful as the Fed's historic moves. Now, fiscal and monetary policy may be on the verge of switching roles. Treasury Secretary Scott Bessent stated the government aims to reduce the deficit to 3% of GDP. This would require Trump’s Department of Government Efficiency (DOGE) to cut $1 trillion in spending.
It remains unclear how achievable this target is, but the mere threat of spending cuts may already be dampening market sentiment and hindering economic growth. By cutting expenditures, Trump could force monetary easing to support fiscal tightening. Whether Trump’s spending reductions actually cause an economic slowdown may not even matter.
As long as these cuts—or the threat of them—coincide with signs of economic slowing, the Federal Reserve may feel compelled to act.
