Donald Trump is reframing his months-long call for the Federal Reserve to cut interest rates, now arguing that such action is crucial to reducing the cost of government debt.

Ahead of the Fed's meeting, the president began pressuring Chair Jerome Powell to support an economy adjusting to higher tariff levels. Now, Trump claims that rate cuts are necessary to address what has become one of the main drivers of the massive federal budget deficit.

Treasury data last week showed that the government spent about $776 billion on interest payments on federal debt over the past eight months. This is 7% more than the same period in the previous fiscal year, when interest expenses had already reached their highest level since the 1990s.

Economists point out that this amount—now significantly exceeding defense spending—reflects both a much larger outstanding debt load, due to COVID-related spending and multiple rounds of tax cuts this century, and the legacy of higher interest rates resulting from the Fed's battle with inflation. Moody's Ratings cited the rise in debt servicing costs as a primary reason for its recent downgrade of the U.S. sovereign credit rating.

"I'd like this guy to lower interest rates, because if he doesn't, we'll have to pay," Trump said during an event at the White House. The president claimed that a 2 percentage point rate cut by the Fed could save $600 billion per year in interest expenses.

Economists warn, however, that such a move would likely backfire. Cutting rates when the economy doesn't need it could raise inflation concerns. Add to that the risk of rising oil prices due to Middle East conflict, and keeping rates steady no longer seems unjustified. "If it's not justified by macroeconomic conditions, lowering interest rates will lead to higher inflation and eventually to higher nominal interest rates," analysts at JPMorgan Chase & Co. stated.

Treasury Secretary Scott Bessent initially noted that he and Trump were focusing on the yield of 10-year Treasury bonds rather than the Fed's overnight rate. However, Trump has returned to the same line of argument he used during his first term: Powell and his colleagues should cut the interest rate.

Last week, Trump also voiced concern over the wave of government debt nearing maturity, which will need to be refinanced at much higher costs than when it was issued. U.S. debt sales surged in 2020 to finance pandemic relief packages, and much of that debt is now coming due. According to an analysis by Nomura Holdings, more than $7 trillion in U.S. debt is set to mature by the end of the year.

This trend is negatively impacting the U.S. dollar and has been pressuring it recently. The risk of a recession in the U.S. economy due to high interest rates is also deterring investors from buying U.S. bonds and sovereign debt.

Technical Outlook for EUR/USD

Currently, buyers need to push above the 1.1540 level. Only then can the pair target a test of 1.1580. From there, a move to 1.1630 may be possible, though achieving that without support from large players will be challenging. The most distant target is the 1.1700 high. In case of a decline, I expect major buyer activity only around the 1.1500 level. If no demand appears there, it may be worth waiting for a drop to the 1.1455 low or entering long positions near 1.1405.

Technical Outlook for GBP/USD

Pound buyers need to reclaim the nearest resistance at 1.3475. Only then will a move toward 1.3505 be possible, although breaking above that level will be difficult. The most distant target is the 1.3533 level. In case of a decline, bears will try to take control at 1.3430. If successful, a breakout below that range would deal a serious blow to the bulls and send GBP/USD down toward the 1.3390 low, with the potential to reach 1.3343.