A year ago, just after he took office, Donald Trump delivered a remote address to the Davos economic forum. One message in particular stood out: his pressure on OPEC to bring down oil prices. "I will also ask Saudi Arabia and OPEC to bring down the price of oil. You have to bring it down, and frankly, I am surprised they did not do it before the election. Their inaction shows a lack of goodwill. I was a little surprised."
Over the past year, OPEC countries have put more barrels back on the market - gradually ending their own production cuts. The result: a barrel of oil is down 19% since January 2025. The good news for Donald Trump is that this has translated into lower prices at the pump for Americans.
But the US president did not get all the benefits he had hoped for at the time. "If the price came down, the Russo-Ukrainian war would end immediately. Right now, the price is high enough for this conflict to continue. You absolutely have to bring down the price of oil. That's how this war will end."
A year later, Donald Trump still has not managed to bring this war to an end. He has repeatedly acknowledged that he thought it would happen faster. During the 2024 campaign, he promised an end "in 24 hours."
While cheaper oil reduces Russia's revenues and constrains the financing of its war effort, it is clear that it has not undermined the Kremlin's determination, which has not appeared in a hurry to conclude peace negotiations.
Donald Trump also hoped interest rates would fall thanks to a lower oil price. "With oil prices going down, I will demand an immediate drop in interest rates. And likewise, they should be dropping all over the world."
The logic is as follows: lower oil prices bring inflation down, which then allows interest rates to fall.
Since that speech, the Fed has cut rates three times, totaling 75bp. However, long-term rates have not fallen as much. The US 10-year yield is only 30bp lower. At the same time last year, Scott Bessent also underscored the importance of long rates: "he (Trump) and I are focused on the 10-year."
Indeed, while gasoline prices are lower, inflation has not eased as much. Core PCE inflation (excluding food and energy) was at 2.8% in January 2025, and still at 2.8% for the latest month published (September).
On top of that are a still very large budget deficit, threats to the Fed's independence, and a desire among major investors to diversify away from US assets in the face of this administration's unpredictability.
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