Trump’s War on the Fed Intensifies as Rate Debate Heats Up

U.S. President Donald Trump has intensified his criticism of Federal Reserve Chair Jerome Powell, accusing him of harming the housing market and urging substantial interest rate cuts. Trump reiterated these claims on Truth Social, emphasizing that high mortgage rates are preventing individuals from securing mortgages and asserting that inflation is not a concern warranting continued high interest rates. This rhetoric has drawn attention ahead of Powell's speech at the Jackson Hole symposium, where investors anticipate insights into the Fed’s future policy direction [1].

The Federal Reserve has maintained its benchmark interest rate within the 4.25%-4.50% range throughout 2025, despite calls from Trump and his Treasury secretary, Scott Bessent, for more aggressive rate reductions. The central bank’s cautious approach is based on concerns that Trump’s proposed tariffs could reignite inflation, which remains above the Fed’s 2% target. While the Consumer Price Index (CPI) showed a 2.7% annual increase in July, core CPI, which excludes volatile food and energy prices, rose by 3.1% year-over-year, signaling ongoing inflationary pressures [2].

Analysts and investors predict a 25-basis-point rate cut at the Fed’s September 16-17 meeting, though this falls short of Trump’s demand for multi-point reductions. The decision will hinge on incoming economic data, including the upcoming August jobs report, which will provide additional clarity on the labor market. Recent employment data has shown a decline in job gains, with only 73,000 nonfarm payrolls added in July, down from over 100,000 in previous months. The unemployment rate remains at 4.2%, indicating a relatively strong but slowing labor market [3].

Meanwhile, mortgage rates have decreased in recent weeks but remain elevated at approximately 6.7%, driven largely by the yield on the 10-year Treasury note rather than the Fed’s overnight rate. Although the central bank cut rates last September, mortgage rates initially rose in response. This dynamic highlights the indirect relationship between Fed policy and long-term mortgage rates, which are influenced by broader market expectations and bond yields. As of now, mortgage rates reflect expectations of a September rate cut, though they could still fluctuate based on new economic data [4].

The Fed’s next policy decision will be closely watched, particularly given the mixed signals in the inflation and labor markets. While some policymakers are open to tolerating short-term inflation from tariffs, others have expressed caution. Recent dissent within the Federal Open Market Committee (FOMC) also points to growing pressure for rate cuts. Both Christopher Waller and Michelle Bowman dissented at the July meeting, and the anticipated appointment of Stephen Miran, a known advocate for lower rates, may further influence the decision [3].

As the September meeting approaches, the Fed faces a challenging balancing act. It must manage the risks of a cooling labor market against the possibility of rising inflation. The outcome will have significant implications for markets and consumers, particularly in the housing sector, where Trump continues to push for more accommodative monetary policy [4].

Source:

[1] Trump Again Attacks Fed Chair, Says Powell 'Hurting' the Housing Industry (https://www.reuters.com/world/us/trump-again-attacks-fed-chair-says-powell-hurting-housing-industry-2025-08-19/)

[2] Trump Claims Powell 'Hurting' the Housing Industry in Latest (https://finance.yahoo.com/news/trump-claims-powell-hurting-housing-225350618.html)

[3] Fed Expected To Cut Interest Rates, Though Inflation May (https://www.forbes.com/sites/simonmoore/2025/08/16/fed-expected-to-cut-interest-rates-though-inflation-may-be-picking-up/)

[4] The Fed is expected to cut rates. Don't expect mortgage rates (https://finance.yahoo.com/news/the-fed-is-expected-to-cut-rates-dont-expect-mortgage-rates-to-follow-113631022.html)