U.S. Federal Reserve Chair Jerome Powell attends a press conference, in Washington, D.C., U.S., March 19, 2025. REUTERS/Nathan Howard/File Photo
Trump Urges Immediate Interest Rate Cuts Amid Economic Slowdown Concerns
President Reiterates Criticism of Federal Reserve Chair
On Monday, former President Donald Trump renewed his criticism of Federal Reserve Chair Jerome Powell, calling for an immediate reduction in interest rates to prevent a potential economic slowdown. Trump expressed his concerns through a post on Truth Social, suggesting that inflation is not a significant threat and asserting that without rate cuts, economic growth could weaken.
“With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump stated.
Market Reaction and Concerns Over Fed Independence
Following Trump’s remarks, U.S. stock markets declined while Treasury yields increased. Investors reacted to the possibility of a renewed confrontation between Trump and the Federal Reserve over monetary policy. The prospect of Trump attempting to remove Powell from office—despite questions about the legal authority to do so—also contributed to market uncertainty.
Although a U.S. president may have limited capacity to unilaterally dismiss the Fed chair, such an attempt could lead to increased political pressure on the central bank and raise concerns about its independence. Even if Powell were removed, the Fed’s monetary policy decisions would still require consensus among the seven-member Board of Governors and regional Federal Reserve Bank presidents.
Federal Reserve Maintains Cautious Stance on Rate Policy
Federal Reserve officials have indicated they intend to proceed cautiously with regard to interest rate adjustments. Despite mounting political pressure, the Fed has emphasized the importance of assessing the full impact of tariff policies and inflation trends before altering the current monetary stance.
Inflation remains above the central bank’s 2% target, and policymakers warn that increased import tariffs could exacerbate price pressures. The Federal Open Market Committee (FOMC) is scheduled to meet on May 6–7, and most analysts expect it will hold the benchmark interest rate steady in the current 4.25% to 4.50% range.
Economic Outlook Shows Signs of Weakening
Economic indicators continue to point toward a potential slowdown. The Conference Board’s Leading Economic Index declined by 0.7% in March. Although the index remains above recessionary levels, it suggests that growth is losing momentum. Weakness in consumer sentiment, manufacturing activity, and equity markets has contributed to the downbeat assessment.
Justyna Zabinska-La Monica, Senior Manager of Business Cycle Indicators at The Conference Board, noted that recent data “pointed to slowing economic activity ahead.”
Tariff Policies and Rising Recession Risks
President Trump’s ongoing efforts to increase tariffs on imports from key U.S. trading partners have raised concerns among economists about the risk of a recession. Higher import taxes can lead to increased costs for businesses and consumers, complicating the economic outlook.
In response to the growing uncertainty, many economists have increased the probability of a recession occurring within the year.
Impact on Financial Markets and Consumers
Stock markets responded negatively to the president’s comments, with the S&P 500 Index declining by 2% on the day. Bond yields also rose, reflecting investor concerns about potential inflation and increased government borrowing costs.
Higher long-term Treasury yields affect borrowing costs for consumers and businesses alike, including mortgages, auto loans, and corporate financing. While the Federal Reserve controls short-term interest rates, long-term yields are influenced by broader market dynamics, which can be affected by public statements and perceived political risks.
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