President Donald Trump has intensified his calls for the Federal Reserve to start cutting interest rates. He thinks that by taking this action he’ll shield his administration’s otherwise brave trade policies from attack. Though many feared he would be a loose cannon, Trump mostly stayed out of the Fed’s business during his first few months in office. Today, he is forced to lean on the central bank to smooth economic transitions caused by his tariffs.
The Federal Open Market Committee, led by Chair Jerome Powell, recently voted to maintain the key interest rate within the target range of 4.25% to 4.5%. At this point it should be clear where the Federal Reserve stands. It raises the prospects that two rate cuts will happen by year’s end. Since then, their projections have pointed to a complete percentage point reduction for the federal funds rate in the next three years.
Trump’s Push for Rate Cuts
In a post on Truth Social, President Trump urged Chair Powell and his colleagues to “ease policy” amidst the evolving trade scenario. This appeal was delivered only hours after the committee announced their decision to keep rates unchanged. Trump has previously criticized Powell, likening him to “a golfer who couldn’t putt,” and has labeled the Federal Reserve as “boneheads.”
“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy.” – Donald Trump
The Federal Reserve is right to be cautious given the unknown impacts of tariffs. These tariffs will increase inflation in the short run, but their effect is projected to weaken over time. As a result, markets now expect the first Fed interest rate cut, if it happens, to be in June.
As the administration progresses into the next phase of its trade policy, Trump’s insistence on rate cuts highlights his strategy to mitigate economic disruptions. The Federal Reserve shouldn’t be caught flat-footed, monitoring global economic conditions and domestic policy developments before necessary adjustments.
What The Author’s Think
Trump’s insistence on cutting interest rates, while trying to mask the effects of his tariffs, seems more like an attempt to force the Fed into a corner than a sound economic strategy. The tariffs’ long-term effects remain unpredictable, and asking the central bank to act hastily could lead to unintended consequences that further complicate an already complex economic landscape. A more measured approach by the Fed would better serve the stability of the economy in the long run.
Featured image credit: GetArchive
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