President Donald Trump upped the ante in his one-sided war of words with Federal Reserve Chairman Jerome Powell on Friday, calling on the central banker to cut the benchmark lending rate by a full percentage point.
“‘Too Late’ at the Fed is a disaster!” Trump wrote on social media, using a variation of the moniker he has given the Fed chair in recent months. “Europe has had 10 rate cuts, we have had none. Despite him, our Country is doing great. Go for a full point, Rocket Fuel!”
Trump’s reference to rate cuts in Europe stems from Thursday’s news that the European Central Bank cut its main deposit rate from 2.25% to 2%, which impacts countries across the eurozone. It has cut rates eight times since last June, when the deposit rate stood at 4%.
The Federal Reserve has kept the benchmark federal funds rate in the range of 4.25% to 4.5% since December 2024. Since then, it has had three chances to cut rates at Federal Open Market Committee (FOMC) meetings in January, March and May, but has chosen to take a cautious approach. The fed funds rate is the overnight lending rate for banks that influences other borrowing costs and has an indirect impact on mortgage rates.
One of the reasons the Fed hasn’t cut interest rates is because inflation remains above its stated 2% target and it doesn’t want to risk further inflationary pressure. However, its preferred inflation measure, the personal consumption expenditures (PCE) price index, fell to 2.1% in April.
Following the FOMC meeting in May, Powell also cited Trump’s global tariff policies as a reason for the Fed’s circumspect approach, saying he thinks “policy rate is in a good place to stay as we await further clarity on tariffs and ultimately their implications for the economy.”
Trump elaborated on his call for a full percentage point rate cut in another social media missive posted eight minutes later.
“If ‘Too Late’ at the Fed would CUT, we would greatly reduce interest rates, long and short, on debt that is coming due,” the president wrote. “There is virtually no inflation (anymore), but if it should come back, RAISE ‘RATE’ TO COUNTER. Very Simple!!!”
The Fed chair does not have a social media presence. His public comments are typically confined to speeches at public events and industry conferences.
On Monday, Powell seemed to allude to Trump’s disruptive tariffs during a speech praising the work of the Fed’s Division of International Finance, which was celebrating its 75th anniversary. Though he did not mention Trump by name, Powell appeared to draw comparisons between the present economic chaos wrought by Trump and other periods of economic uncertainty, such as the 2008 financial crisis and the COVID-19 pandemic.
“As we continue to navigate the current period of heightened uncertainty,” Powell said, the work of the Division of International Finance is “critical to understanding the quantitative implications of uncertainty shocks.”
Even if Powell and his fellow Fed policymakers decide to cut rates at the next FOMC meeting later this month, a full-point rate cut would be highly unlikely. The last time the Fed took that drastic of a step was in March 2020, when the economy was in freefall as the scope of the global pandemic became clear.
Investment activity by futures traders tracked by the CME FedWatch tool shows that the most likely scenario is that the Fed will wait until September to cut rates by just 0.25%. As of Friday morning, CME Group data indicated that the odds are 99.9% that the central bank will hold rates steady in June.
