U.S. Federal Reserve pulls trigger on 'dovish hike'
Federal Reserve Chairman Jerome Powell’s interest-rate increase on Wednesday may add almost US$1 million to the Trump Organization’s annual borrowing costs.
The increase may raise President Donald Trump’s cumulative cost from the U.S. central bank’s hikes since his inauguration to US$6 million per year, according to a Bloomberg News analysis of the president’s financial disclosures and property records.
The Fed, which has been the target of sustained criticism from Trump over its rate increases, raised its benchmark short-term interest rate another quarter percentage point, a move that will ripple through financial markets to raise the Trump Organization’s debt service payments on US$340 million in variable-rate loans.
Trump took out the loans from Deutsche Bank between 2012 and 2015 to develop a golf course outside Miami and hotels in Washington and Chicago. Every quarter-point increase by the Fed raises Trump’s annual interest payments by an estimated US$850,000.
Wednesday’s rate hike, the seventh since Trump’s inauguration, would push Trump’s estimated annual borrowing cost on those variable-rate loans to about US$17.1 million, Bloomberg’s analysis shows.
Trump’s interest payments are pegged to either the prime rate -- the rate banks charge their best customers -- or one of seven tenors of the London interbank offered rate, commonly known as Libor. Both rates generally move in tandem with the federal funds rate set by the Fed. Trump’s loan documents don’t specify whether Trump and Deutsche Bank have elected to use Libor or the prime rate when calculating Trump’s payments.
Bloomberg’s analysis is based on how much Trump borrowed, rather than how much he presently owes. Trump has to make balloon payments when the loans come due in 2023 and 2024, according to property records and his financial disclosure.
The Trump Organization has declined to comment on its borrowing.