On Wednesday evening, President Donald Trump took aim at the Federal Reserve, urging the central bank to lower interest rates shortly after it decided to keep borrowing costs unchanged.
This was yet another instance of Trump pressuring the Federal Reserve, despite the long-standing convention of political independence within the institution.
Trump contended that reducing interest rates would better prepare the economy for the impact of tariffs set to escalate in the coming weeks.
“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump wrote on Truth Social, adding, “Do the right thing.”
He did not elaborate further, but in January, he similarly called for interest rate cuts, citing what he described as the likelihood of falling oil prices.
Speaking in Washington, D.C. on Wednesday afternoon, Federal Reserve Chair Jerome Powell attributed a “good part” of recent inflation to Trump’s tariffs and advocated for a cautious, observant approach as the new administration’s economic policies take shape.
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Although the Fed chose to keep its key interest rate unchanged, it revised its projections, anticipating weaker economic growth and higher inflation by the end of the year compared to its December forecast.
Powell acknowledged the economic uncertainty, pointing to the Trump administration’s anticipated “significant policy changes” in areas such as trade, immigration, and regulation.
“Uncertainty around the changes and their effects on the economic outlook is high,” Powell remarked. “We are focused on parsing the signal from the noise.”
Economists previously told ABC News that if the Federal Reserve raises interest rates to counter tariff-induced inflation, it risks discouraging borrowing and slowing economic activity.
On the other hand, they noted that if the Fed cuts rates to stimulate the economy in response to a potential slowdown, it may encourage greater spending and further drive up inflation.
Trump’s rare public rebuke of the Federal Reserve came just weeks after his tariffs ignited a global trade dispute, sending stock markets into turmoil and fuelling concerns about a possible recession.
Despite these fears, some economic indicators remain strong. Recent employment data showed steady job creation and an unemployment rate near historic lows. Although inflation is considerably below its 2022 peak, it remains nearly a percentage point above the Federal Reserve’s target of 2%.
Trump also called for lower rates in January, just days before the Fed opted to leave them unchanged.
At a press conference in Washington, D.C. following that decision, Powell declined to respond to Trump’s comments, stating it would be “inappropriate” to do so.
“The public should be confident that we’ll continue to do our work as we always have,” Powell said, reiterating that the Fed remains committed to “using our tools to achieve our goals.”
Following the latest rate decision, a reporter once again questioned Powell about whether Trump’s influence could affect the Fed’s decisions. Powell responded briefly, maintaining his earlier position.
“I think I did answer that question in this very room some time ago,” Powell said. “And I have no desire to change that answer, and have nothing new for you on that today.”
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