Trump Rates the Fed—Says Powell’s Policy Needs a 2-3 Point Cut

Image Source: CNN

In recent history, former U.S. President Donald Trump has criticized Federal Reserve Chairman Jerome Powell again, stating that interest rates "should be at least two to three points lower." The statement, released via Truth Social, comes at the time of the Fed deciding to leave rates unchanged and mounting political pressure over economic performance during Trump's second term.

1. Trump's Criticism of the Fed

Trump had called Powell a "real dummy" and accused him of costing America billions by failing to cut interest rates.
He had also argued that inflation has cooled down enough to justify a rate cut and that the Fed's position is hurting the housing market and consumer confidence.
Trump had previously called for interest rates to be cut by a whole percentage point, on the basis of having to cut the interest burden of the government and inducing growth.

2. Fed's Stance

The Federal Reserve has kept its policy rate ranging from 4.25% to 4.50% due to the need to monitor inflation and the impact of new tariffs.
Chairman Powell stated, "We'll make smarter and better decisions if we just wait a couple of months," as a phrase conveying prudence in the presence of mixed economic signals.
The Fed also reduced its 2025 growth estimate to 1.4% and raised its inflation estimate to 3%.

3. Political and Market Implications

Trump's comments come amid his approval ratings on the economy declining, with recent polls showing only 37% approval for the economy.
Experts warn that drastic rate cuts could fuel inflation, while others argue they're necessary to encourage investment and pay off debt burdens.
The Fed is also taking into account Trump's new tariffs of 10%, which Powell suggested would accelerate inflation and dampen growth.

Sources: Times of India, TIME, RealClearPolling