Trump Renews Fed Criticism, Says Rates Should Be 2.5 Points Lower
The central bank’s updated quarterly economic projections point to a mildly stagflationary outlook, with growth slowing to 1.4%.
Quick overview
- The U.S. Federal Reserve has decided to keep interest rates steady in the 4.25%–4.5% range, despite calls from President Trump for a reduction.
- Trump argues that interest rates should be lowered by 2.5 percentage points, criticizing Fed Chair Jerome Powell for the economic impact of current rates.
- The Fed's updated projections indicate a mildly stagflationary outlook, with growth slowing and inflation expected to remain elevated in the coming years.
- The Fed's statement did not address recent geopolitical tensions, such as the conflict between Israel and Iran, which could affect global markets.
The comments came after the U.S. Federal Reserve decided to keep interest rates steady in the 4.25%–4.5% range.
U.S. President Donald Trump reiterated his calls on Thursday for the Federal Reserve to cut interest rates, asserting that they should be 2.5 percentage points lower.
Despite ongoing pressure from the Executive Branch, the central bank remains cautious due to the potential inflationary risks stemming from tariffs imposed by the Republican leader.
“Jerome Powell is costing our country hundreds of billions of dollars… We should be 2.5 points lower,” Trump wrote in a post on Truth Social, referring to the Fed Chair.
On Wednesday, the Fed left its benchmark interest rate unchanged, holding it within the 4.25% to 4.5% range. Nonetheless, policymakers still aim to reduce borrowing costs by half a percentage point over the course of the year—though revised inflation forecasts may delay the pace of cuts.
Fed Projects Stagflation-Like Scenario for the U.S.
The central bank’s updated quarterly economic projections point to a mildly stagflationary outlook, with growth slowing to 1.4%, unemployment rising to 4.5%, and inflation climbing to 3%—significantly above current levels.
According to the latest estimates, inflation is expected to remain elevated at 2.4% through 2026, before easing to 2.1% in 2027, amid largely stable unemployment.
“Uncertainty around the economic outlook has decreased, but remains elevated,” the Fed stated in its latest policy announcement—an update from the more turbulent language used in May, at the height of trade tensions.
So far, however, “the unemployment rate remains low and labor market conditions are still strong,” the statement said. The text was approved unanimously by the committee.
Notably, the statement made no mention of the recent escalation in hostilities between Israel and Iran, nor the potential risks the conflict poses to global oil markets or broader financial stability.
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