Trump boasts "US economy can grow by 20%", says the Federal Reserve should not raise rates because of this

Zhitong Finance APP has learned that on Monday local time, US President Trump, while announcing an agreement aimed at lowering prescription drug prices in the Oval Office, stated that US economic growth could reach 14%, 15%, 16%, or even 20%. He emphasized that such rapid growth should not prompt the Federal Reserve to raise interest rates.

"The success of growth will not trigger inflation," Trump told reporters at the event. His remarks come as he continues to pressure the Federal Reserve to lower borrowing costs, while Fed officials are still dealing with inflation above the 2% target level.

In July this year, the Federal Reserve kept its benchmark interest rate unchanged at 3.5% to 3.75%, but three policymakers dissented and leaned toward a 25-basis-point increase. Many Federal Reserve observers expect the Federal Open Market Committee (FOMC) to resume raising rates at its next meeting in September.

However, growth rates anywhere near 20% as mentioned by Trump are almost unheard of in modern US economic history.

According to data from the US Bureau of Economic Analysis (BEA) since 1947, only one quarter saw an annualized real Gross Domestic Product (GDP) growth rate reach or exceed 20%—the third quarter of 2020, when the economy reopened after widespread COVID-19 lockdowns, with an annualized growth rate of 34.9%. In the preceding quarter, the economy had contracted sharply at an annualized rate of 28%.

The second-ranked quarter was the first quarter of 1950, as the US and worldwide economies were recovering from World War II and the baby boom generation had just been born, with an actual GDP annualized growth rate of 16.7%. In the nearly 80 years of data since, no other quarter has touched the 20% mark.

By comparison, current economic growth is only a fraction of the above levels. According to the latest BEA estimates, the real GDP annualized growth rate for the second quarter of 2026 is 1.5%, down from 2.1% in the first quarter.

It should be noted that quarterly GDP growth is reported at an annualized rate, meaning a 20% reading does not represent actual growth of 20% in a single quarter.

Trump offered the potential for high growth as another reason the Federal Reserve should cut rather than raise rates. "We should have the lowest rates in the world," he said when responding to reporters’ questions about the Fed potentially raising rates. "In the past...if we had good data, rates would go down. Now, if you release good data, rates go up because they're too scared of inflation."

Strong economic growth does not necessarily trigger inflation. If productivity and capacity increase in line with demand, the economy can expand rapidly without significant pricing pressure. But when demand rises faster than the economy's ability to produce goods and services, prices are driven higher. This is exactly the challenge currently facing the Federal Reserve—decision-makers remain highly alert to any signals that might further overheat demand, amid a still-tight labor market and sticky service sector inflation.

This latest "confrontation" between Trump and the Federal Reserve also highlights once again the deep-seated differences between the White House and the central bank regarding the path of interest rates. Although the president is confident in ultra-high-speed growth, historical data and actual performance indicate that a 20% target is more of a political vision than a near-term economic reality. For markets, the upcoming inflation and employment data to be released before the September rate meeting will likely be more decisive than any lofty statements.