The Federal Reserve would likely have lowered interest rates this year if not for significant policy changes by President Donald Trump, Chair Jerome Powell stated Tuesday.
In a central banking forum in Sintra, Portugal, Jerome Powell, Chair of the Federal Reserve, indicated that the Fed might have reduced interest rates this year had it not been for the substantial policy shifts implemented by President Donald Trump. When questioned about the possibility of rate cuts, Powell remarked, “I do think that’s right.”
So far this year, the Federal Reserve has refrained from lowering interest rates. Central bankers anticipate that Trump’s tariffs will impact the U.S. economy, prompting them to take a cautious approach, opting to monitor how these changes affect the economic landscape before making any decisions on rate adjustments.
This cautious stance, however, has drawn criticism from President Trump, who has persistently criticized Powell’s decision not to reduce rates. Trump has called Powell derogatory names such as a “numbskull” and a “moron” for maintaining higher interest rates compared to other countries.
In a handwritten note shared on his social media platform on Monday, Trump lambasted Powell, alleging that the Fed’s policies have financially harmed the United States. White House press secretary Karoline Leavitt confirmed that this note was delivered to the Fed on the same day.
The sentiment to cut rates is shared, albeit to a lesser extent, by others within the Fed. Two officials — Michelle Bowman, Fed Vice Chair for Supervision, and Fed Governor Christopher Waller — have opined that a rate cut could be considered as early as July. However, unlike Trump, they have refrained from advocating dramatic cuts, emphasizing that any decision should be contingent on economic conditions, specifically the severity of tariff-induced inflation.
Despite some internal support for rate adjustment, the likelihood of a rate cut in July remains slim, as indicated by futures data which estimate an 81% probability of rates holding steady at the Fed’s July 29-30 meeting, compared to a 19% chance of a quarter-point rate cut.
Powell, during his panel in Sintra, acknowledged that a majority of Fed officials foresee the necessity of reducing rates later this year, depending on inflation trends and labor market developments. He stated, “A solid majority of (Fed officials) do expect that it will become appropriate later this year to begin to reduce rates again.”
When asked about the possibility of a July rate cut, Powell refrained from giving a definitive answer, noting that he “can’t say” but would not dismiss any meeting from consideration.
European Central Bank President Christine Lagarde, who was also on the Sintra panel, expressed support for Powell’s data-driven approach to policymaking and commended him for his apolitical stance. She affirmed that Powell “epitomizes the standard of a courageous central banker.”
Powell has refrained from responding to President Trump’s public barbs and reiterated his commitment to his responsibilities, stating, “I’m very focused on just doing my job.” Lagarde, when asked how she would respond to criticisms akin to those from Trump, supported Powell’s stance, suggesting, “I think we would (all) do exactly the same thing as our colleague, Jay Powell, does.”
Following Lagarde’s comment, attendees at the conference offered applause in support. Powell reiterated the Fed’s mission to maintain macroeconomic stability, emphasizing the need for a non-partisan approach, stating, “We don’t take sides. We don’t play one side against the other. We stay out of issues that are really not our bailiwick.”
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