President Donald Trump is escalating high-stakes clashes between the White House and the central bank as he calls for a Federal Reserve cut and his administration prepares to unleash a new wave.
“The Fed will have a much better cut rate as US tariffs begin the road to the economy (easiness!),” Trump declared Wednesday night in The Society of Truth. “Do the right thing. April 2nd is America's liberation day!!”
Trump's comments have landed as the Federal Open Market Committee, led by Chairman Jerome Powell, decided to stabilize benchmark interest rates for the second consecutive meeting. Powell on Wednesday stressed that while Fed staff believe tariffs could contribute to product inflation, the impact is expected to be “temporary.”
“I think it's kind of a basic case, but like I said, we really can't know that. We need to see how things really work,” Powell said at a post-meeting press conference, fulfilling his concerns about persistent inflation from tariffs.
The Trump administration is set to announce new tariffs on April 2 as part of what the president calls “mutual” measures to address what he describes as an unfair global trading system. So far, details are vague, with key economic advisers putting their targets and fees.
Trump's latest advice to the Fed seems to be a mild version of his relentless criticism from his first semester. Now, the market is already hoping to cut interest rates by June, so Trump is pushing to speed up the process. But instead of playing the role of a belligerent critic of the Fed that financial news outlets expect, Trump has adopted the stance of relevant advisers.
But even if Trump urges the Fed to ease its policies, administration officials stress that the president respects the Fed's independence, pointing out that Trump has not tried to order the central bank to take a different position while expressing his views on monetary policy. Treasury Secretary Scott Bescent said Wednesday that the White House has granted the Fed's authority but is focused on reducing long-term borrowing costs by lowering Treasury yields for 10 years.
Still, the market is withstanding potential cuts, with Fed policymakers projecting a complete point reduction to 4.5% from their current target range of 4.25% over the next three years.
While Trump has argued it is useful in offsetting the economic impact of tariffs, Powell's statement reveals that the Fed is not yet convinced that risk justifies aggressive easing of policies. Early cuts could cause new inflationary pressures when Fed officials believe that rates are likely to put upward pressure on prices.
The forecast released along with interest rate decisions on Wednesday showed Fed officials increased their inflation estimates this year from 2.5 to 2.8%, and increased their forecast for the following year from 2.1% to 2.2%. High expected inflation usually requires relatively high interest rates.
At the same time, they will lower estimates of growth over the next three years, perhaps reflecting their expectations that other countries will respond to US tariff hikes by increasing their own tariffs. Slow growth usually indicates a lower interest rate target. The conflicting impulse highlights the Fed's tricky dilemma as it navigates an economy that has rejected forecasts for years and is performing the extremely difficult outcomes of new trade policies.
