Trump Pressures Fed as Rate Cuts Look Unlikely in 2025

President Donald Trump has been relentless in his criticism of Federal Reserve Chair Jerome Powell regarding interest rates. Recent developments in the economy, such as better-than-expected employment and inflation data, have only fueled Trump’s attacks on Powell and the central bank’s stance on interest rates.

In response to the latest inflation data for May, which showed overall inflation running at 2.4% on an annual basis, Trump took to social media to call for a full percentage point cut in interest rates. He argued that such a move would reduce the amount of interest paid on the country’s debt, emphasizing the importance of the issue.

This is not the first time Trump has lashed out at Powell and the Federal Reserve. Following the release of monthly jobs data in May, which revealed more job creation than anticipated, Trump urged the Fed to follow Europe’s lead and implement rate cuts to provide a boost to the economy.

Currently, the Fed’s benchmark federal funds rate is holding steady in a range of 4.25% to 4.5%, unchanged since a quarter percentage point reduction last December. Despite Trump’s calls for aggressive rate cuts, the likelihood of such actions has diminished in recent weeks.

Market expectations for a rate cut at the latest Fed meeting have dropped significantly, with only a 2% chance of a cut being predicted. The uncertainty surrounding Trump’s trade policies, particularly the imposition of tariffs, has made the Fed hesitant to make any drastic moves.

Analysts suggest that the Fed is unlikely to lower rates for the rest of the year due to the uncertain impact of tariffs on inflation and economic growth rates. The prevailing view is that inflation remains elevated, and the ongoing trade war could further exacerbate inflationary pressures.

While some on Wall Street anticipate modest rate cuts later in the year, the likelihood of significant reductions is low. Market projections indicate a 5% chance of rates remaining unchanged, with a possible scenario of two quarter-point cuts in the future.

Recent developments in tariff negotiations and slower economic growth have raised hopes for a potential rate cut, but experts caution that any reductions would likely be symbolic and limited in their effectiveness. The Fed is adopting a cautious approach to assess the impact of tariffs on consumer prices before making any significant policy changes.

In conclusion, despite Trump’s demands for aggressive rate cuts, the Fed is likely to maintain a wait-and-see approach to ensure that any adjustments to interest rates do not have unintended consequences on the economy. The uncertainty surrounding trade policies and inflationary pressures necessitates a cautious approach from policymakers.