President Donald Trump on Thursday continued his extraordinary and targeted verbal attacks on Federal Reserve Chair Jerome Powell, calling for a massive 2.5-point reduction in interest rates.
Despite appointing Powell to the role in 2017, Trump has frequently chastised the Fed chair for keeping rates higher than the president would like. On Wednesday, after a monetary policymaking meeting, the Fed said it would be maintaining rates between 4.25% and 4.5%, noting that the economy remains strong but the path of inflation is uncertain in part because of the enormous tariffs that Trump has placed on foreign goods.
“‘Too Late’ Jerome Powell is costing our Country Hundreds of Billions of Dollars,” Trump posted on Truth Social Thursday. “He is truly one of the dumbest, and most destructive, people in Government, and the Fed Board is complicit.”
“TOO LATE’s an American Disgrace!” Trump continued.
An immediate cut of two and a half points would be unprecedented. The Fed generally adjusts its benchmark lending rate up or down by a quarter point, but the size of each rate adjustment is congruent with the economic reality at that moment. For example, when inflation was running at 40-year highs in 2022, the Fed was hiking by as much as three-quarters of a point at a time. Equally, when the economy was ailing during the onset of the pandemic, the Fed cut rates aggressively.
Powell has refused to respond to Trump’s barbs, instead saying he is focused on the Fed’s mandate to keep inflation low and job growth high. When asked about Trump’s stated desire to nominate a new Fed chair next year when his term expires, Powell said he’s focused exclusively on the present.
“From my standpoint, it’s not complicated,” Powell said. “What everyone on the [Federal Open Market Committee] wants is a good, solid American economy with strong labor market and price stability. That’s what we want. Our policy is well positioned right now to deliver that.”
“America’s economy has been resilient,” Powell said. “Part of that is our stance. We think we’re in a good place on that, to respond to significant economic developments. That’s what matters. That is what matters to us. Pretty much that’s all that matters to us.”
Fed members in their economic projections said they expect two quarter-point rate cuts this year, which would bring rates to around 3.75% to 4%. But Trump has remained unsatisfied.
“Europe has had 10 cuts, we have had none. We should be 2.5 Points lower, and save $BILLIONS on all of Biden’s Short Term Debt,” Trump said. “We have LOW inflation!” (The Fed’s euro zone counterpart, the European Central Bank, has lowered rates eight times in the past year, not 10.)
Although US inflation has remained low, Powell noted prices may increase in coming months as companies sell off goods that had been in their warehouses, brought in before tariffs, and begin selling items that have a tariff attached to them.
“We’ve had goods inflation just moving up a bit,” he said Wednesday. “We do expect to see more of that over the course of the summer. It takes some time for tariffs to work their way through the chain of distribution to the end consumer. A good example of that would be goods being sold at retailers today may have been imported several months ago before tariffs were imposed.”
Powell noted that many companies expect to pass tariff costs to consumers. But too much remains uncertain to lower rates at the moment.
“Today, the amount of the tariff effects — the size of the tariff effects, their duration and the time it will take are all highly uncertain,” Powell said Wednesday. “So that is why we think the appropriate thing to do is to hold where we are as we learn more. And we think our policy stance is in a good place where we’re well-positioned to react to incoming developments.”
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