Quick overview

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President Donald Trump insulted Fed Chair Jerome Powell by calling for the Fed to cut interest rates once more.  Nonetheless, Trump acknowledged that his attacks hindered Powell’s efforts.  Trump referred to Powell as a “numbskull” 

 

“I know that my harsh criticism of him makes it harder for him to do what he should be doing, which is to lower rates, but I’ve tried it all.“. Nice and neutral didn’t work, and I’ve been both nasty and neutral.

The president had been at loggerheads with  Powell and the Fed for months for not cutting interest rates fast enough, claiming that the US central bank is trailing behind its European counterpart. He explained the Fed has not lowered borrowing costs, and the federal government was compelled to make significant interest rate payments on its debt.

Board of Governors member Christopher Waller said the Fed should consider cutting interest rates as early as July.

The tension between Trump and the Fed, and now possibly even within the Fed, highlights the unpredictability of the world’s largest economy.  Experts say it’s too soon to declare victory even though broad tariffs haven’t yet produced the anticipated inflationary effects,

Trump is also still concerned about companies paying more for imported goods. Central bankers should “look through these types of price shocks,“

Waller highlighted that Trump’s high tariffs are likely to be limited and will only cause a “one-off” spike in inflation. Waller stated, “At this time, we are in a good position to discuss lowering the rate.”. He said the Fed should “start slow,” rather than demanding the massive rate cuts that Trump has called for.