The Federal Reserve would likely have lowered interest rates this year if it weren’t for President Donald Trump’s significant policy changes, Chair Jerome Powell said Tuesday.
“I do think that’s right,” he said at a central banking forum in Sintra, Portugal, when asked if the Fed would have cut rates by now.
The Fed hasn’t lowered interest rates at all this year: Central bankers broadly expect Trump’s tariffs to have some effect on the US economy and they’ve said that they want to see how the dust settles first before resuming rate cuts.
But the Fed’s wait-and-see approach hasn’t sat well with Trump, who has repeatedly lashed out against Powell for not yet lowering rates, describing him as a “numbskull” and a “moron.”
On Monday, Trump posted on his social media platform a note in his handwriting slamming Powell for keeping interest rates higher than dozens of other nations, writing that he “cost the USA a fortune” and that he continues “to do so.” White House press secretary Karoline Leavitt said the note was delivered to the Fed that same day.
Trump hasn’t been the only one calling for rate cuts. Two of Powell’s colleagues — Fed Vice Chair for Supervision Michelle Bowman and Fed Governor Christopher Waller — have recently broken rank and said the central bank could consider a rate cut as soon as July. But neither of them has gone as far as to call for the supersized rate cuts Trump has demanded. Both have said rate cuts still depend on how mild any tariff-induced inflation turns out to be.
Still, a rate cut in July seems unlikely and would be difficult for the Fed to defend. Investors estimate a 81% chance of the Fed holding rates steady at its July 29-30 meeting, according to futures, compared with a 19% chance of a quarter-point rate cut.
Powell in his Sintra panel noted that most Fed officials expect to lower rates at some point later this year, depending on what happens with inflation and the labor market.
“A solid majority of (Fed officials) do expect that it will become appropriate later this year to begin to reduce rates again,” Powell said.
When asked if July would be too soon for a rate cut, Powell said “he can’t say” but that he “wouldn’t take any meeting off the table or put it directly on the table.”
European Central Bank President Christine Lagarde — who has publicly backed Powell’s apolitical, data-driven approach to policymaking — praised the Fed leader on Monday, noting that he “epitomizes the standard of a courageous central banker.” She was on the panel with Powell Tuesday.
So far, Powell has avoided commenting on Trump’s attacks, including on Tuesday when he was asked if Trump’s harsh public comments make it difficult to conduct monetary policy. Powell said that “I’m very focused on just doing my job.”
Lagarde was asked how she would handle Trump’s criticism if she were in Powell’s position, to which she responded: “I think we would (all) do exactly the same thing as our colleague, Jay Powell, does. The same thing.”
Conference attendees clapped after Lagarde’s comment.
“We’re trying to deliver macro stability, financial stability, economic stability for the benefit of all the people,” Powell said. “If we’re going to do that successfully, we need to do it in a completely non-political way, which means we don’t take sides. We don’t play one side against the other. We stay out of issues that are really not our bailiwick.”
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