The Western Journal

Trump pressures Powell to cut rates just before Fed’s tariff warning

The article discusses President Donald Trump’s call for Federal Reserve Chairman Jerome Powell to reduce interest rates, coinciding with Powell’s warning about global tariffs.Trump expressed this request as markets reacted negatively to tariffs, and he emphasized that the economic indicators were favorable, suggesting it was an opportune time for a rate cut. In response, Powell indicated that the Fed woudl keep rates steady for now, citing concerns about unexpectedly high tariffs and their potential economic impact. The relationship between Trump and Powell is characterized by tension, as Trump has historically criticized Fed policies and Powell has defended the Fed’s independence. The financial markets were in turmoil, with significant declines in major indices at the time of Powell’s remarks. Powell highlighted the need for caution and clarity before making any policy changes, pointing out the Fed’s dual mandate to manage inflation and employment.


Trump pressures Powell to cut rates just before Fed chairman issues tariff warning

President Donald Trump called on Federal Reserve Chairman Jerome Powell to slash interest rates on Friday, right before Powell warned about tariffs and indicated the central bank would hold rates steady for the time being.

Trump’s push for the Fed to cut rates comes at the end of a tumultuous week in which markets cratered in response to sweeping global tariffs. Trump made the remarks on his social media platform just minutes before Powell spoke publicly about the tariffs for the first time.

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates,” Trump wrote. “He is always ‘late,’ but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months — A BIG WIN for America.”

Trump also accused Powell of “playing politics.” Historically, there has been a firewall between the presidency and the Fed to keep the White House from interfering in monetary policy.

Powell, speaking at a business conference in Virginia, said the new tariffs — 10% blanket tariffs across the globe and with higher levies on some countries — are larger than the Fed anticipated.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected,” Powell said. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”

Throughout his speech, Powell stressed the uncertainty at hand. He also essentially said the Fed would do the opposite of what Trump is pushing it to do and would hold interest rates steady for the time being until the Fed gets a better sense of how the economic landscape develops.

“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy.”

The situation is a tricky one for Powell and the Fed.

Typically, the Fed raises interest rates or keeps them high to drive down inflation when it is running too hot, and inflation is still above the Fed’s 2% goal. But the Fed has a dual mandate — not only price stability but also maximum employment. When unemployment starts rising, the Fed typically cuts interest rates.

Powell indicated the Fed is in wait-and-see mode. If Trump’s tariffs start causing the economy to falter, it might be forced to lower interest rates, but it has to balance that with the potential that doing so could cause inflation to remain too high or even rise higher.

Trump and Powell have a bit of a rocky relationship as well.

Powell was known for standing up for the Fed’s independence during Trump’s first term, gaining him support from some Democrats. During his first term, Trump was known for being critical of Fed policy and hit the central bank for raising interest rates too quickly.

In 2019, Trump notoriously wrote that his “only question is, who is our biggest enemy” — Powell or Chinese leader Xi Jinping.

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Powell has said consistently that he doesn’t believe Trump had the authority to fire him.

Meanwhile, Wall Street was in panic mode on Friday. The Dow Jones Industrial Average was down more than 1,500 points around the time of Powell’s speech, and both the S&P 500 and Nasdaq had seen more than 4% of their value erased on Friday alone.



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