The Fed has spoken, and President Donald Trump isn’t pleased with what it had to say.
“‘Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue,” Trump wrote in a post Thursday morning on Truth Social, referring to the chairman of the Federal Reserve. He then struck a conciliatory tone, adding that “other than that, I like him very much!”
Trump, of course, was referencing this week’s decision by the Federal Open Market Committee (FOMC) to keep the benchmark federal funds rate unchanged at its current range of 4.25% to 4.5%. The president, in public comments and on social media, had persistently attacked Powell’s hesitancy to cut interest rates in the weeks leading up to the Fed’s May monetary policy meeting — including during an April 23 chat with reporters at the White House, when he said he might call Powell to tell him to lower rates.
Powell confirmed during his press conference following the interest rate announcement that he has not spoken with the president during his second term in the White House. He also said that uncertainty surrounding Trump’s global tariff policies influenced the Fed’s rate decision, noting that the central bank is awaiting “further clarity on tariffs and ultimately their implications for the economy.”
Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA), said in commentary released Thursday that the MBA predicts that a rise in unemployment will spur the Fed to cut rates in the latter half of 2025.
“MBA forecasts that the risks to growth and the job market will wind up being the bigger concern this year, which will lead the Fed to resume cutting short-term rates in the second half of the year,” Fratantoni said. “Until then, the hard data on inflation and unemployment will continue to drive interest rates, including mortgage rates, from one end of a trading range to the other, with only a slight downward trend in mortgage rates over the remainder of 2025.”
Jay Bryson, chief economist for Wells Fargo Corporate and Investment Banking, commented that even if unemployment rises in the short term, the Fed may have a difficult time balancing its dual mandate of maintaining stable prices and maximum employment.
“On one hand, the FOMC would want to ease (monetary) policy as the jobless rate rises,” Bryson wrote. “On the other hand, however, rising inflation would induce Fed policymakers to refrain from easing policy, if not tighten it. In other words, there may be some tension in terms of the Fed’s dual mandate (i.e., ‘price stability’ and ‘full employment’) in coming months.”
Investors are now much less convinced that the Fed will cut interest rates at its June policy meeting. On April 25, futures traders put the odds at 64% that the Fed would lower rates in June, according to the CME FedWatch Tool, which tracks fed funds futures contracts. As of Thursday afternoon, the odds fell to just a 17% probability of a June rate cut.
The more likely scenario, according to the current sentiments of futures traders, is that the Fed will make three 25-basis-point rate reductions in 2025, with the first cut coming in July.
