"Trump Urges Powell: 'Slash Interest Rates by 1%' ... Fed Expected to Resist Until Autumn"

# Trump Escalates Criticism of Fed Chair Jerome Powell, Hints at Successor U.S. President Donald Trump has intensified his public criticism of Federal Reserve Chair Jerome Powell, emphasizing the approaching end of Powell's term in May next year and hinting at a potential successor. On July 6, following the release of stronger-than-expected employment data, Trump targeted Powell, urging the Federal Reserve to slash interest rates by a full percentage point immediately. Trump accused Powell of inaction, claiming that if inflation rises—a primary concern for the Fed—it would be a "simple matter" to raise rates again at that point. Trump even mentioned Powell’s tenure during an Air Force One interview, stating, “I am considering replacing Powell, and the announcement will come soon.” Additionally, the president took to social media, sarcastically calling Powell someone who "delays action too much" and arguing that cutting interest rates by one percentage point would act as "rocket fuel" for the strong U.S. economy. This isn’t the first time Trump has pressured the Fed for rate cuts. The president has repeatedly pushed for lower interest rates over the past several years, even holding a direct meeting with Powell at the White House in May. With the Federal Open Market Committee (FOMC) scheduled to meet on July 17-18, market participants largely anticipate the central bank to hold rates steady, considering it has maintained rate levels throughout the year. Wall Street forecasts suggest that rate cuts may not occur until September at the earliest. # Trump’s Justifications: Employment Stability and Borrowing Costs Trump further justified his call for aggressive rate cuts by pointing to the strength of the U.S. labor market. He argued that the Fed’s hesitation to lower interest rates burdens the government with excessive borrowing costs. The president added, “In the current short-term debt structure, with no signs of inflation, lower rates now, and raise them later if necessary.” Data supports Trump’s focus on borrowing costs. The average interest rate on U.S. government debt stands at 3.36%, exceeding pre-pandemic levels. In 2022, the U.S. paid interest costs equivalent to 3.06% of GDP, the highest level since 1996. Annual interest expenses now rival the nation’s defense budget. # Fiscal Concerns and Policy Conflict While both Trump and the Republican Party have pledged to curb government spending, recent moves to push additional tax cuts raise concerns about long-term fiscal health. According to the Congressional Budget Office (CBO), Trump-backed tax legislation under consideration would increase the federal government’s interest expense by approximately $551 billion over the next decade. This brewing fiscal debate has sparked tensions, even outside traditional political spheres. A public clash between Trump and tech entrepreneur Elon Musk over the proposed tax reforms turned personal, with both sides exchanging sharp criticism. As Trump pushes for an accelerated timeline for rate reductions and a larger cut, he challenges the idea of central bank independence. This tug-of-war with the Fed leaves markets closely watching not just the FOMC meeting but also potential indications of succession at the Federal Reserve, signaling political pressure on monetary policy at a time of economic and fiscal uncertainty.