Vice President JD Vance accused Federal Reserve Chairman Jerome Powell of “monetary malpractice” for not cutting interest rates during a period of easing inflation.
“The president has been saying this for a while, but it’s even more clear: the refusal by the Fed to cut rates is monetary malpractice,” Vance wrote on the social media platform X this week.
Vance’s comments were in response to a post by a Bloomberg journalist about the consumer price index (CPI), a widely tracked measure of inflation. On Wednesday, the U.S. Bureau of Labor Statistics reported that the CPI rose 2.4% year over year in May, a slight increase from April’s 2.3% inflation reading.
In January, when President Donald Trump and the vice president took office, CPI inflation stood at 3%. The personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation, has also moved lower, falling from 2.5% in January to 2.1% in April. The Fed’s stated inflation target is 2% over the long run.
Trump has been needling Powell for months on rate cuts. In May, Trump summoned the Fed chair to the Oval Office, where he told the central bank head that his reluctance to lower the benchmark federal funds rate has put the U.S. at an economic disadvantage to China and other countries, according to a statement by White House Press Secretary Karoline Leavitt.
The Fed typically raises rates when inflation is too high and cuts rates during periods of reduced inflation. Rate cuts tend to stimulate the economy by lowering borrowing costs, but if inflation heats up it erodes purchasing power and can have a destabilizing economic impact.
Last week, Trump urged Powell to cut the fed funds rate by a full percentage point, which would be an extraordinary step that the Fed hasn’t taken since the onset of the COVID-19 pandemic in March 2020.
Trump went even further Thursday, claiming during a White House press conference that if the Fed lowered interest rates by 2% it would save the U.S. $600 billion a year by reducing the interest charged on federal debt.
The president also called Powell a “numbskull” for not lowering rates sooner, though he said he has no plans to attempt to remove him from office.
“I don’t know why it would be so bad, but I’m not going to fire him,” Trump said.
A 2% rate cut during a single Fed monetary policy meeting would be unprecedented. And even a quarter-point cut at next week’s Federal Open Market Committee (FOMC) meeting would be a surprise. As of Thursday afternoon, investment activity by futures traders tracked by the CME FedWatch tool puts the odds at roughly 97% that the Fed will keep the federal funds rate at its current range of 4.25% to 4.5%.
Powell, as is his custom, has not commented publicly on the recent attacks by Trump and Vance. Following the last FOMC meeting in May, Powell said that Trump’s rapidly evolving tariff policies had made it difficult to gauge the long-term effects of import duties on inflation.
Meeting minutes subsequently revealed that Fed officials were concerned about the possibility of stagflation, which is when high inflation coincides with stagnant economic growth and elevated unemployment.
The next FOMC meeting begins June 17. The Fed’s rate policy decision will be announced the following day.
