Former President Donald Trump has articulated his belief that the Federal Reserve should reduce the benchmark interest rate by at least 2 percentage points. As it stands, that rate is 4.33%. Trump claims that it should be lowered to 2.5%, making debt cheaper and easing the burden on our national debt that has climbed to $36 trillion.
In its most recent meeting, the Federal Open Market Committee (FOMC) voted to keep interest rates steady. This hold represents the fourth consecutive hold since the last rate cut in December. Federal Reserve Chair Jerome Powell indicated that the Fed is adopting a “wait-and-see” approach as economic data continues to show stability.
With calls from all sides to backtrack, Powell reiterated that the economy’s key indicator—the strong labor market—is doing well. He added, “The data has been good up to this point,” suggesting a prudent optimism given current economic conditions. The Fed has been on pause for six months, and Powell believes this strategy allows for a careful assessment of future moves.
Most recently, Federal Reserve Governor Christopher Waller has called for an easing of interest rates. That could occur as soon as next month. Waller, who was appointed by Trump while he was still president, expressed his worries about the tight labor market. He cautioned that if the Fed doesn’t raise rates, it risks a slowdown.
“I think we’re in the position that we could do this and as early as July.” – Christopher Waller
Agrees with Trump’s repeated calls to slash rates to stimulate economic growth. He added that beginning to lower rates now would address any potential harm posed by a declining labor market.
“If you’re starting to worry about the downside risk labor market move now don’t wait.” – Christopher Waller
Furthermore, Waller doesn’t expect tariffs to be a major contributor to rising inflation, adding more cover for a rate cut. The rate futures market indicates very low expectations for any rate cut at the next FOMC meeting on July 29-30. Most analysts are now betting that any changes won’t come until September at the earliest.
We’re already seeing discussions about how high interest rates are going. Policymakers should continue to focus on the important mission of ensuring strong economic growth while maintaining control of inflation. The Federal Reserve’s commitment to monitoring economic indicators will play a pivotal role in determining its next steps concerning interest rates.