July Jobs Report Sparks 85% Rate Cut Odds Amid Trump Tariff Pressures

Jerome Powell faces mounting pressure to cut interest rates as a weak July jobs report has intensified concerns over a slowing U.S. economy. The Labor Department reported a nonfarm payroll gain of just 73,000 jobs in July—well below expectations—and significant downward revisions for May and June, which removed a combined 258,000 jobs from prior estimates. The unemployment rate edged higher to 4.2%, reinforcing fears of a weakening labor market [1]. These developments have shifted market expectations, with traders now pricing in an 85% probability of a rate cut at the September Federal Open Market Committee (FOMC) meeting [2].

The broader economic landscape has shown signs of strain. Growth in the first half of 2025 slowed to an annualized 1.2%, below the longer-term trend of 2.0%, and key indicators such as the ISM manufacturing employment index have continued to decline [3]. Analysts attribute much of the pressure to President Donald Trump’s aggressive tariff policies, which have pushed up import costs and added to inflationary pressures. Brian Rose of UBS Global Wealth Management noted that while the economy is slowing, the Fed needs to see further confirmation that inflation will ease before acting [4].

Trump has been vocal in his criticism of Powell, calling him a “stubborn MORON” and demanding that the Federal Reserve Board take control of the central bank if rate cuts do not occur [5]. This public pressure has intensified amid the administration’s sweeping tariffs on imports from over 60 countries, including the EU, Japan, and China. These measures, which include baseline and surcharge rates, have created uncertainty in global markets and added to domestic economic anxiety [6].

Despite these pressures, the Fed has maintained a cautious stance, emphasizing the need to assess the full impact of tariffs on inflation before deciding on rate cuts. Powell has repeatedly stressed that the central bank must remain data-driven and focused on long-term stability [7]. However, as the Jackson Hole Economic Symposium approaches, analysts expect him to signal the Fed’s readiness to act if labor market conditions continue to weaken.

Stephen Brown of Capital Economics described the July jobs report as a “payrolls shocker” and predicted a more dovish policy shift in the coming months. Rose of UBS outlined a scenario in which the Fed could cut rates by 25 basis points at each of the next three meetings, bringing the federal funds rate down to a “roughly neutral” level [8].

While Trump continues to push for more aggressive economic measures, including further tariffs and budget cuts, political support for such actions remains mixed. Senate Majority Leader John Thune has cautiously backed the president’s stance but stopped short of demanding immediate Fed intervention. Meanwhile, concerns over the independence of economic institutions have resurfaced following the removal of Bureau of Labor Statistics director Erika McEntarfer. Senate Democrats criticized the move as an attack on data integrity, while the administration defended it as necessary for ensuring accuracy [9].

As the U.S. economy stands at a crossroads, the decisions made by the Federal Reserve in the coming months will be critical in shaping its trajectory. With markets reacting swiftly to each development, the balance between inflation control and economic growth remains a central challenge for policymakers.

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Source:

[1] https://fortune.com/2025/08/01/when-will-jerome-powell-cut-rates-july-jobs-report-trump/

[2] https://www.kob.com/ap-top-news/trump-calls-on-federal-reserve-board-to-wrest-full-control-of-central-bank-from-fed-chair-powell/

[3] https://wlos.com/news/nation-world/president-trump-calls-jerome-powell-a-stubborn-moron-and-urges-federal-reserve-board-to-seize-control-of-central-bank-interest-rates-inflation-tariffs-consumers-economy-job-report

[7] https://www.cbs42.com/top-stories/trump-fumes-at-powell-urging-federal-reserve-board-takeover/