The Chancellor and US President have little in common, either personally or politically. Reeves is a centre-left Labour politician who puts her faith in state intervention and redistributive taxation. Trump is a right-wing populist who backs tax cuts, deregulation and big business. He’s not known for his commitment to redistribution, unless it’s to himself and his family.
Reeves champions free trade, Trump prefers tariffs. Reeves insists she’s “iron” on fiscal discipline, while Trump rarely shows restraint in anything, fiscal or otherwise. Yet today, their interests collide. Both are desperate for the same outcome.
Trump has been demanding it for months, publicly and loudly. Reeves won’t shout about it, but she’ll be privately wishing just as hard. It could just spare her – and the rest of us – from a Budget nightmare in November.
The world is waiting for what Wall Street is calling an “extraordinary” meeting in Washington this afternoon. The stakes couldn’t be higher.
US Federal Reserve chair Jerome Powell must decide whether to keep rates high to fight inflation or cut them to protect jobs. Trump isn’t torn. We know exactly what he wants Powell to do.
The US president has made his views clear again and again, putting huge pressure on the supposedly independent Fed. He’s publicly abused Powell for years, labelling him “a complete moron”, “major loser”, “fool”, “numbskull” and “truly one of the dumbest” for good measure. Powell is none of these things. Whether Trump is, I’ll let you decide.
So far, Powell has brushed off the insults and got on with the job, but today could be the moment when he finally cuts rates. The US economy is flashing warning signs, with the jobs market weakening. Yet consumer price inflation is still running at 2.9% a year, well above the Fed’s 2% target.
Markets have already made up their mind. Traders are pricing in a 93% chance that the Fed will trim rates by a cautious 0.25%. There’s an outside chance of a bolder 0.5% move. Even that wouldn’t satisfy Trump, but Reeves wouldn’t complain.
Trump’s motives are obvious. He wants a booming economy and surging stock market to parade as proof of success. Lower rates could deliver that short-term boost, even if they risk stoking inflation. Trump isn’t worried about that. He wants a quick win.
So does Reeves. UK borrowing costs have soared to a 27-year high on her watch. As deficits widen and debt piles up, bond investors are wary of lending to the UK.
Gilt yields are also influenced by US Treasuries. If the Fed cuts and US yields fall, our debt costs should ease too.
That could wipe billions off Reeves’s borrowing projections, helping balance the books ahead of her November Budget. A bold US move might even nudge the Bank of England to follow with a modest cut tomorrow, from 4% to 3.75%. Neither Trump nor Reeves deserves such a lucky break. But if the Fed delivers, both will claim the credit.
The rest of us should hope for a cut too. It could bring down mortgage rates and ease the tax raid Labour is lining up for November 26. For once, we all want the same thing as Trump and Reeves. Will we get it? We’ll find out later this afternoon.