Former President Donald Trump isn’t one to hold back when it comes to the Fed, having referred to Federal Reserve Chair Jerome Powell as “stupid” in public. He says she’ll “likely cut” interest rates when the Federal Open Market Committee (FOMC) finishes up its meeting on Wednesday. Trump’s remarks come about the same time the FOMC prepares to announce its decision on interest rates. They will further be releasing an updated economic policy platform.
Of course, Jerome Powell’s term as Fed chair expires in May 2026. Only last month, Trump promised to announce a new replacement. This step, if taken, would be the beginning of the end of the Federal Reserve’s current leadership. Trump’s relationship with Powell has been contentious over the years, with previous attacks highlighting his dissatisfaction with the current monetary policy.
Despite the political pressure from Trump, Powell and his colleagues have emphasized their commitment to making decisions based on economic data rather than political influence. They have pulled back from raising rates, with vague but chronic uncertainty around both jobs and inflation data swirling. The market is pricing in zero possibility of a rate cut at this meeting. Instead, market expectations are turning now to a likely move in September.
In his speech last week, Trump focused on the role of rising interest rates. He claimed that these rates are costing the U.S. “hundreds of billions” in financing costs. He believes that the Fed’s key borrowing rate should be at least two percentage points lower to stimulate economic growth.
The skepticism about inflation that Trump voiced during the campaign still appears to heavily influence his thinking on monetary policy. He expressed confidence in the stability of the economy, stating, “If he’s worried about inflation, that’s OK. I understand that. I don’t think there’s going to be any. So far there hasn’t.”
The former president hinted at a more personal involvement in the Fed’s future, suggesting, “I’d do a much better job than these people.” And yes, as we recently reported, Trump is still actively considering appointing himself as Fed chair. This decision further poisons the already fraught relationship between the White House and the independent central bank.
Going into the FOMC meeting, inflation indicators have been close to flat since tariffs were enacted in early April. This stability, not surprisingly, adds more nuance and complication to the fertility discussions related to interest rates and monetary policy.