The Fed hopes Trump will maintain a stable fee despite demanding deep cuts
Former NEC director Gary Cohn and former Federal Reserve Governor Kevin Wersch analyses the Federal Reserve policy regarding Kudrow.
The Federal Reserve announced its latest decision on Wednesday on whether to cut interest rates, facing growing political pressure from the Trump administration, facing lowering interest rates to drive the economy.
This week, the Fed is widely expected to leave interest rates unchanged, making it four consecutive meetings with the central bank unchanged. The benchmark federal funding rate is in the target range of 4.25% to 4.5% since the Fed’s last interest rate cut in December.
Central bank policymakers kept interest rates at that level due to uncertainty regarding the impact of tariffs on both sides of the double mission to pursue maximum employment and stable prices with a long-term goal of 2% inflation. Inflation fell from the 40-year high that the US economy experienced in 2022, but exceeds the Fed’s target.
President Donald Trump and Vice President JD Vance have ramped up criticism of the Fed’s reluctance to cut interest rates, and ridiculed Federal Reserve Chairman Jerome Powell as “too late” to push to influence central bank financial policy decisions.
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President Donald Trump on the left tried to put pressure on the interest rates awarded Chairman Jerome Powell. (Getty Images / Photo Illustration / Getty Illustration)
After a stronger than expected May report was released earlier this month, Trump said Fed Powell should cut interest rates in full points to provide “rocket fuel” for economic growth.
“Too late” with the Fed is a disaster! ” Trump wrote in a post about True Society. “We had 10 interest rate cuts in Europe, and we had nothing.
Trump repeated his call for a full point cut last Wednesday after inflation data showed a lower than expected rise in the Consumer Price Index (CPI).
“CPI is just. Many! FRED needs to lower one all point. Trump wrote in a post about True Society.
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President Donald Trump has repeatedly accused the Fed of not cutting interest rates in line with his demands. (Get McNamee / Getty Images / Getty Images)
“The president has said this for a while, and that’s even more clear,” Vance said in a post on X last Wednesday.
Powell said the Fed hasn’t been rushing down the rates, and is monitoring risks to both sides of the dual mission, including revived inflation and labour market degradation.
The Trump administration’s tariff policy, which has been partially lagging in some cases, but has also increased tariff rates significantly in some others, has injected additional uncertainty into the economy as consumer prices could rise in the coming months.
“We need to see how this evolves,” he said at a press conference following the Federal Reserve meeting in May. “It may be appropriate for us to cut fees this year. It may not be and we don’t know.
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President Donald Trump nominated Jerome Powell as Federal Reserve Chairman in 2017, but said he would not re-nominate him when his term lasts for office next year. (Saul Loeb/AFP via Getty Images/Getty Images)
He also emphasizes that the group of central banks responsible for setting monetary policy, the federal open market committee, is not based on decisions regarding politicians’ lobbying.
At a press conference following the Fed’s decision to change interest rates in January, the chairman was asked about the comments Trump made at the World Economic Forum. Powell replied, “I don’t think he has any responses or comments about what the president said. It’s not appropriate for me to do so.”
The market is overwhelmingly predicting that the Fed will change on Wednesday, as it shows a 98.7% chance that the target rate will remain between 4.25% and 4.5% as of last Thursday. The Fed’s July meeting is considered a 23.4% chance of a reduction, in contrast to the 76.4% chance of a fee that is stable in its current range, which is considered a high chance of interest rate reduction.
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The Fed’s meeting in September is seen as an opportunity to reduce rates. Traders expect a 58.7% chance to be reduced by 25 basis points in the target rate, down from 4% to 4.25% range after that meeting.
