President Donald Trump is demanding the Federal Reserve cut interest rates, escalating a high-stakes clash between the White House and the central bank as his administration prepares to unleash a new wave of tariffs.
“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump declared on Truth Social Wednesday night. “Do the right thing. April 2nd is Liberation Day in America!!!”
Trump’s comments landed just as the Federal Open Market Committee, led by Chair Jerome Powell, decided to keep its benchmark interest rate steady for a second straight meeting. Powell said Wednesday that Fed staff believes tariffs could contribute to goods inflation, but emphasized that their impact is expected to be “transitory.”
“I think that’s kind of the base case. But as I said, we really can’t know that. We’re going to have to see how things actually work out,” Powell said during a post-meeting press conference, playing down concerns about lasting inflation from tariffs.
The Trump administration is expected to announce new tariffs on April 2 as part of what the president has called “reciprocal” measures to address what he describes as an unfair global trade system. So far, details are murky, with key economic advisers hashing out targets and rates.
Trump’s latest advice to the Fed appears to be a gentler version of his relentless criticisms from his first term, when he lambasted the central bank for raising rates and at one point branded Powell and his colleagues “boneheads.” Now, with markets already expecting rate cuts by June, Trump is pushing to speed up the process. But instead of playing the role of the belligerent critic of the Fed that the financial press expects, Trump has adopted the stance of a concerned adviser.
Yet, even as Trump urges the Fed to ease policy, administration officials emphasize that the president respects the Fed’s independence, pointing out that while Trump is expressing his opinion on monetary policy he is not trying to order the central bank to take a different position. Treasury Secretary Scott Bessent said Wednesday that the White House acknowledges the Fed’s authority, though it is focused on bringing down long-term borrowing costs by lowering the 10-year Treasury yield.
Still, markets are bracing for potential cuts, with Fed policymakers projecting a full percentage point reduction over the next three years from the current target range of 4.25 percent to 4.5 percent.
While Trump insists that lower rates would be useful to offset the economic impact of tariffs, Powell’s statements make it clear the Fed is not yet convinced the risks justify an aggressive easing of policy. A premature rate cut could spark renewed inflationary pressures at a time when Fed officials think tariffs are likely to put upward pressure on prices.
In the projections released alongside their interest rate decision Wednesday, Fed officials increased their estimate for inflation this year to 2.8 percent from 2.5 and increased the expected inflation for the following year to 2.2 percent from 2.1 percent. A higher expected rate of inflation would normally call for a relatively higher interest rate.
At the same time, they lowered their estimate for growth over the next three years, perhaps reflecting their expectation that other countries will react to U.S. tariff hikes by raising their own tariffs. More sluggish growth would normally indicate a lower interest rate target. The conflicting impulses highlight the Fed’s tricky dilemma as it navigates an economy whose performance has defied predictions for years and the very hard-to-forecast results of new trade policies.
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