Trump Wants More Rate Cuts from the Fed in 2025
Urges Persistent Reduction in Interest Rates by Trump Towards Federal Reserve - Trump advocates for another reduction in federal interest rates
The latest move by the US Central Bank (Fed) to adjust its monetary policy isn't a surprising twist for experts. Despite emphasizing that the Fed doesn't stick to a fixed path, Chair Jerome Powell announced they'd stick to their December forecast, aiming for two rate cuts in 2025.
The Fed made an adjustment to its growth and inflation projections for this year. Powell attributed a significant part of the price hikes to Donald Trump's trade policies.
Back in September, the Fed began to lower interest rates due to a dip in inflation and a steady US labor market. They eventually reduced the federal funds rate by a full percentage point. Despite Trump's demand for an "immediate" rate cut in late January, the Fed decided to pause instead.
Since taking office in 2017, Trump has been busy imposing and announcing various tariffs, as well as temporarily suspending some. He frequently uses tariffs as a negotiating tool against other countries.
- Donald Trump
- US Central Bank
- Federal Funds Rate
- US President
- Jerome Powell
Trump's Pressure and the Fed's Perspective
- Rate Cut Calls: Since 2025 is just around the corner, Trump has been ramping up his demands for the Federal Reserve to slash interest rates. He believes this would supercharge economic growth[1].
- Fed's Caution: While Trump wants rate cuts, the Fed has hesitated to comply due to ongoing inflation worries and the potential impacts of Trump's trade policies on the economy[1].
The Economic Landscape and Fed's Decisions
- Inflation and Growth: The Fed is keeping an eye on inflation and possible economic slowdowns in 2025. This cautious approach is demonstrated in their decision to keep current interest rates[1].
- Tariffs and Trade Policy: The effects of Trump's trade policies, particularly tariffs, are causing inflation. The Fed acknowledges that tariffs might have temporary consequences, but they're adding unpredictability to the economic outlook[1].
Future Expectations
- Investor Skepticism: Market forecasters show some doubt about an immediate rate cut, but they believe there might be reductions later this year. The CME FedWatch tool suggests that rates might stay put in May, but a decrease could be on the horizon by June[1].
In a nutshell, while Trump pushes for rate cuts to props up economic growth, the Fed is moving with caution, considering inflation risks and uncertainties connected to Trump's trade policies. The tension between the Fed's independence and Trump's influence persists in their relationship.
[1] Enrichment Data
- Trump has been urging the US Central Bank (the Fed) to lower the federal funds rate in 2025, with the aim of boosting economic growth.
- However, the Fed's hesitation to comply with Trump's rate cut calls stems from ongoing concerns about inflation and potential impacts of Trump's tariffs and trade policies on the economy.
- In the near future, while market forecasters are skeptical about an immediate rate cut, they still expect possible reductions later in the year, as suggested by the CME FedWatch tool.
