Trump Demands Action: Inflation and Interest Rates Plummet - Crypto Markets Poised for Explosive Growth

Former President Trump's latest economic demands coincide with a dramatic downturn in inflation and interest rates—creating the perfect storm for digital asset adoption.

Market Dynamics Shift Rapidly

Traditional finance institutions scramble as monetary policy reverses course. The Federal Reserve's unprecedented rate cuts signal a fundamental reshaping of global capital flows.

Crypto Sector Primed for Breakout

With inflationary pressures easing and borrowing costs collapsing, institutional capital floods into blockchain infrastructure. Bitcoin dominance wanes as altcoins capture massive momentum.

Regulatory Landscape Evolves

Washington's sudden policy pivot catches Wall Street off-guard. Legacy banks now face existential threats from decentralized finance protocols offering superior yields.

Investment Implications

Smart money rotates out of traditional bonds into staking rewards and liquidity mining. The great digital migration accelerates as yield-starved investors discover real returns.

Because nothing says 'sound monetary policy' like politicians demanding action while algorithms execute trades at light speed.

Trump and Powell

Since Trump took office, he has engaged in unconventional actions, such as imposing high tariffs, consistently calling for interest rate cuts, and initiating military operations. His administration seeks ways to leverage the economic and military might of the U.S. in managing the burgeoning national debt. Miran’s job brings clarity to the unusual viewpoint Trump adopts regarding the current economic scenario, and what prompts his belief in declining inflation alongside falling rates.

Trump’s Economic Theory

In his debut speech as a Fed member at the New York Economic Club, Miran discussed “Trump’s economic theory.” At the forefront of shaping the technical foundation for tariffs and Trump’s economic strategy, Miran emphasized the usefulness of Taylor-type rules in providing guidance, despite acknowledging no perfect method exists to set policy rates. He pointed to three main factors: inflation, the neutral interest rate, and the output gap.

• Inflation
• Neutral interest rate
• Output gap

Miran highlighted the critical role of inflation and changes in employment acknowledged by Fed officials, noting that the production gap is fed by these elements. However, consensus on the neutral rate remains elusive among Fed members.

According to Miran, keeping track of shifts in the neutral interest rate is risky. He argues that past high immigration rates and fiscal policies, which increased national savings, were not correctly considered in previous neutral rate estimates, potentially influencing policy. Changes in border and fiscal policies may now impose downward pressure on the neutral rate.

He suggested that the optimal rate should be around 2%, considering recent insufficiently addressed changes in tariff and fiscal policies. These policies impact monetary policy, substantiating the argument for a 2% neutral rate.

Inflation

Housing and personal consumption expenditures significantly impact inflation indices, according to Miran. He noted that while measured inflation has tracked above actual market rents for some time due to delay-adjustment, new rent indices suggest much lower inflation in rents now, around 1% annually.

With expectations of this trend continuing, Miran predicts that by 2027, rent inflation will drop below 1.5%, reducing general inflation by 0.3%. Changes in immigration policy could alleviate supply issues, controlling inflation.

It is anticipated that by the end of the year, 2 million undocumented immigrants WOULD leave the U.S., lowering annual population growth from 1% to 0.4%, aiding reduced inflation and interest rates.

Budget Deficit

Tariffs are expected to reduce the budget deficit by $380 billion annually over the next decade, normalizing the budget deficit-GDP ratio, according to Miran. As a result, the neutral interest rate could further decline.

“Customs duties are not the only tools affecting the supply of loanable funds in the trade policy toolkit. Loans and guarantees pledged in return for relatively low tariff caps by East Asian countries have reached $900 billion. This leads to an external increase in credit supply, which research suggests would rise by about 7%. Using Council of Economic Advisers (CEA) elasticity estimates, it could reduce neutral rates by about two-quarter points.”

Summary

Miran discussed tax policies and business easing regulations, summarizing the need for a lower neutral rate. He advises the Fed to adjust policies accordingly.

“Accounting for shocking factors, I derive a real interest value a point below other models. Including median inflation, production channels, and standard Taylor rule methods suggest a 2-2.25% rate, while a balanced approach suggests 1.5-2%. Market-implied rates are notably higher,” Miran explained.

Miran concluded that monetary policy is overly restrictive, with short-term interest rates posing risks of layoffs and unemployment. He criticizes that Trump’s strategic steps this year aren’t being taken seriously by the institution, emphasizing the significant impact of immigration policy, regulations, and tariffs.