On Thursday local time, US President Trump once again strongly criticized Federal Reserve Chair Jerome Powell and further urged him to cut interest rates. Trump claimed at the White House that lowering interest rates by 2 percentage points could save the United States $600 billion annually, “but we can’t get this person to do that.”
“We spend $600 billion every year, and that $600 billion is because a fool sits here and says, ‘I don’t think there’s enough reason to cut interest rates now,'” Trump said. Trump also added that if inflation rises, he agrees with the Federal Reserve raising interest rates. “But inflation has dropped,” he said. “I may have to enforce some measures.”
Trump threatened to fire Powell in April this year, which panicked investors. After the fluctuations in the financial market, he changed his tune and said he had no intention of firing Powell. In his speech on Thursday, Trump reaffirmed that he “would not fire” Powell.
Just a few hours before Trump made these remarks, the US Department of Labor reported that the increase in the US Producer Price Index (PPI) in May was lower than what some economists had expected. Data released the previous day showed that the US consumer price index (CPI) rose by 0.1% month-on-month and 2.4% year-on-year in May, respectively lower than market expectations of 0.2% and 2.5%. Core CPI, which excludes food and energy costs, rose by 2.8% year-on-year, remaining at its lowest level since March 2021 and also lower than market expectations of 2.9%.
Both types of data have allayed some of people’s concerns that tariffs would cause a surge in inflation and have prompted Trump and his allies to increase pressure on the Federal Reserve. Including Trump himself, three Trump administration officials have pressured Powell in the past two days.
Shortly after the CPI data was released on Wednesday, Trump posted on his social media platform “Real Social,” saying, “The CPI data has just come out. It’s a great figure!” The Federal Reserve should cut interest rates by a full percentage point. Trump added that if the Federal Reserve could cut interest rates, it would significantly reduce the interest the US government has to pay on debts that are about to mature. “It’s so important!!”
Meanwhile, US Vice President Mike Pence echoed on social media platform X, saying, “The president (Trump) has been saying this for some time, but now it’s even clearer: The Fed’s refusal to cut interest rates is a dereliction of duty in monetary policy.” “It’s incredible how much money we can save if (Powell) fulfills his duties and cuts interest rates,” said US Commerce Secretary Wilbur Ross on Wednesday evening. “The economy is ready. This is very easy. The inflation rate is very low. Please. He must perform his duties as soon as possible.”
The next interest rate meeting of the Federal Reserve will be held on June 17th – 18th. Despite Trump’s strong pressure, traders almost completely do not believe that the Federal Reserve will cut interest rates in the upcoming interest rate decision, and they also think that the possibility of the central bank taking a rate cut action at the July meeting is very small. By contrast, traders expect a higher possibility of interest rate cuts in September. According to data from the CME Group, the current probability is approximately 76%.
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