Core Viewpoint - The article discusses President Trump's pressure on the Federal Reserve to lower interest rates, aiming to align monetary policy with his fiscal priorities, which could lead to inflation and economic stagnation in the long run [2][4]. Group 1: Trump's Objectives - Trump's push for lower interest rates is intended to facilitate financing for the recently passed tax cuts, breaking the traditional link between budget deficits and interest rates [4][5]. - The article warns that this "fiscal dominance" approach is historically associated with economic crises in emerging markets, potentially leading to a dangerous combination of inflation and stagnation [4][5]. Group 2: Economic Indicators and Market Reactions - Despite a projected budget deficit increase to $3 trillion over the next decade, the yield on the 10-year U.S. Treasury bond has decreased from 4.55% in May to 4.35% recently, indicating market expectations of future rate cuts [6]. - Treasury Secretary Mnuchin emphasized that the government will act according to Trump's wishes regarding the Federal Reserve's leadership and criticized current Fed Chair Powell for not lowering rates promptly [8]. Group 3: Federal Reserve's Position - The Federal Reserve has maintained its interest rate policy, with the target range set at 4.25% to 4.5%, while the two-year Treasury yield has fallen to around 3.88%, suggesting a disconnect in market signals [8]. - The upcoming Federal Reserve meeting on July 10 is anticipated to provide insights into their monetary policy stance, especially in light of strong employment data [9].

Core Viewpoint - The U.S. Treasury Secretary emphasizes that tariffs and budget are interconnected, suggesting a holistic approach to fiscal policy [1] Summary by Relevant Categories Fiscal Outlook - It is believed that the deficit size will be lower in 2025 compared to the previous year [1] - By 2028, the ratio of U.S. debt to GDP is expected to stabilize [1] Political Sentiment - There is sympathy towards deficit hawks, indicating a recognition of concerns regarding fiscal responsibility [1]