US President Donald Trump said yesterday that Federal Reserve Chair Jerome Powell’s termination “cannot come fast enough,” while calling for the US central bank to cut interest rates, the sort of pressure that Powell just a day before had pledged to resist as the Fed grapples with an outlook complicated by Trump’s own policies.
Trump, in a post on his social media platform Truth Social, reiterated his stance on rate cuts, saying that Powell “should have lowered interest rates, like the (European Central Bank), long ago, but he should certainly lower them now.”
The ECB cut its key rate a quarter of a point yesterday in response to a growth outlook that had “deteriorated owing to trade tensions” in the wake of Trump’s efforts to raise US import taxes, while euro-area inflation is expected to continue falling.
In the US Trump’s plans have also led to a lower growth outlook, with economists polled by Reuters putting recession odds at 45 per cent. But it has also raised the prospect of higher inflation that policymakers said they are guarding against.
“I don’t see any need to change the setting of the fed funds rate anytime soon...It’s really about collecting information, understanding better what’s happening in the economy during the rest of this year, understanding kind of how the uncertainty plays out,” New York Fed President John Williams said on Fox Business yesterday. “I think we have a period of higher inflation this year and a slower growth path for this year relative to last year. So that’s a combination you have to think carefully about.”
The Fed’s benchmark interest rate is currently 4.25pc-4.50pc, where it has been since December following several rate cuts late last year.
Trump’s comments come a day after Powell said at an event at the Economic Club of Chicago that the Fed’s “independence is very widely understood and supported in Washington and in Congress where it really matters,” drawing applause from the high-level group of business executives for a pledge to set interest rates independent of political pressure or partisan considerations.
Trump has at times threatened to try to fire Powell, as he is attempting to do with members of other independent policy bodies in a move currently before the US Supreme Court.
Powell yesterday said the Fed is watching the case carefully but does not think any decision will apply to the central bank, whose credibility in managing monetary policy is considered important not just to the US economy, but in global markets tuned to Fed decisions.
Powell’s term as chair expires in May 2026, regardless. It was unclear from Trump’s language whether he is resigned to waiting that time out, or hoping for a Supreme Court decision that lets him remove Powell sooner.
Trump in his post said Powell was “always too late and wrong”, and critiqued the speech Powell made on Wednesday, calling it “another, and typical, complete mess!”
Powell on Wednesday warned Trump’s tariff policies risked pushing inflation and employment further from the central bank’s goals.
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