Fed cuts interest rates

 

Cue Trump crowing about making Powell bow down.

Trump wants to "terminate" Jerome Powell

President Donald Trump’s significant policy changes, including on tariffs, are unlike anything seen in modern history, putting the Federal Reserve in uncharted waters, Chair Jerome Powell said Wednesday.

“These are very fundamental policy changes,” Powell said at an event hosted by the Economic Club of Chicago. “There isn’t a modern experience of how to think about this.”

Powell said “the level of the tariff increases announced so far is significantly larger than anticipated” and that the lingering uncertainty around tariffs could inflict lasting economic damage. With Trump’s tariffs putting the economy on a path toward weaker growth, higher unemployment and faster inflation — all at the same time — the Fed is also facing a situation it hasn’t dealt with in about half a century.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell said.

US stocks tumbled as Powell spoke: The Dow was down 700 points, or 1.7%. The broader S&P 500 fell 2.5%. The tech-heavy Nasdaq Composite slid 3.5%.

[...]

Powell said the Fed’s best move for the moment is to stand pat until the data clearly shows how the US economy is responding to Trump’s policies.

But it’s only a matter of time until Trump’s tariffs stoke inflation, push up unemployment and weaken economic growth, according to most economists, especially if the massive “reciprocal” tariffs that went into effect briefly on April 9 are put back in place.

  CNN

"Our independence is a matter of law...In our statute, we're not removable except for cause. We serve very long terms, seemingly endless terms. So we're protected in the law," Powell said.

"Congress could change that law, but I don't think there's any danger of that. Fed independence has pretty broad support across both political parties and in both sides of the Hill."

In his speech addressing the outlook for interest rates, he said the Federal Reserve can stay patient and wait to see how tariffs and other economic policies of the Trump Administration play out before making any changes. There are fears of a recession.

[...]

"For the time being, we are well positioned to wait for greater clarity" on the impact of policy changes in areas such as immigration, taxation, regulation, and tariffs, he added.

Earlier in April, Powell had told a conference that the tariffs, and their likely impacts on the economy and inflation, are "significantly larger than expected."

He also said that the import taxes will probably lead to "at least a temporary rise in inflation," but added that "it is also possible that the effects could be more persistent."

  Newsweek

“Jerome Powell just laid down the law with Trump,” David Russell, global head of market strategy at TradeStation, said in commentary issued Wednesday. “It was a clear warning about stagflation, and a declaration that the Fed won’t enable the White House with rate cuts.”

  CNN

Well, as you might have guessed, that didn't go down well in Mar-Embargo. The Orange King howled.

Trump thinks the Federal Reserve should cut interest rates more quickly than it is to help fuel economic growth, but rate-setters are juggling the impacts of his tariffs, which threaten to push inflation higher, a situation that cutting rates would worsen.

The Federal Reserve's decision-making is supposed to be free from political interference so it can make calls it believes are right for the country and the economy rather than in the interests of presidents or lawmakers.

In a post on his Truth Social platform, Trump noted that the European Central Bank (ECB) is expected to cut interest rates again, and suggested Powell should be doing the same, calling him "always TOO LATE AND WRONG".

"Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS," Trump wrote.

  Newsweek

I'll stop for a moment while you finish laughing.

"Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell's termination cannot come fast enough!"

Trump's fractious relationship with Powell dates back to his first term, when he tried to pressure the Fed to keep interest rates low while the economy was booming. Trump says he is entitled as president to comment on the Fed's actions.

We're ALL entitled to comment on the Fed's actions.

Trump picked Powell for the Fed back in 2017 and former President Joe Biden reselected him in 2021.

[...]

Powell's term ends in 2026 and Trump cannot fire him, though he nominates the replacement.

[...]

The Federal Reserve is independent of the government so it can set monetary policy without the direct intervention of politicians.

For now.

The dual-mandate of the Federal Reserve's monetary policy, set by Congress, is to maximize employment while keeping prices stable, targeting a 2 percent rate of inflation.

[...]

Presidents traditionally do not comment on monetary policy decisions to preserve the Fed's independence in decision-making.

Trump is, if anything, NOT a traditional president.

The rate-setting Federal Open Market Committee is set to meet again between May 6 and 7, when they will have a somewhat clearer picture of how the global trade war kicked off by Trump is impacting the economy.

But there are likely to be a number of still unresolved issues—and new ones—around trade, as negotiations between the U.S. and its trading partners continue, and the economic conflict with China heats up even more. Uncertainty reigns.

Things are not going to improve any time soon.

UPDATE 05/26/2025:

 

Not everyone is afraid of the big bad orange wolf

The Federal Reserve cut its key interest rate by 0.5 per cent Tuesday—thrusting it into the center of a political firestorm.

[...]

Markets rose immediately on the cut, the biggest since crisis measures taken in 2008 as the economy collapsed into the Great Recession.

But the cut is also the most politically-charged action taken in recent history by the interest-rate setting body—because former president Donald Trump had repeatedly demanded that it keep interest rates stable before the election. He and his aides think a cut in the cost of borrowing would benefit Vice President Kamala Harris’ campaign by convincing people that the economy is strong and by reducing concerns over inflation.

  Daily Beast

Sure, fuck with the economy so he can win. Avoid passing meaningful immigration legislation so he can win. Anything and everything is at risk if it means he can win.

The Fed, under chairman Jerome Powell—a Trump appointee who the former president has since publicly repudiated—voted for the cut after months of falling inflation reports and a slow-down in jobs growth. Economists believe that if they had not acted, high interest rates would have increased the chances of a recession.

...but hey, do what you want...you will anyway.

UPDATE 07:26 pm:  If Trump didn't want it to happen, THEY didn't want it to happen.  

Breaking

Federal Reserve Chair Jerome Powell gave the all clear for interest rate cuts to begin as hiring and job gains slow down.

“The time has come for policy to adjust,” Powell said in a Friday speech from Jackson Hole, Wyo. that looked back over the monetary response to the pandemic.

“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell said.

  The Hill