Trump Demands Two Percentage Point Rate Cut, Threatens Powell

President Donald Trump has intensified his criticism of Federal Reserve Chair Jerome Powell, demanding immediate interest rate cuts and hinting at potential consequences if his wishes are not met. Trump, who has been vocal about his dissatisfaction with Powell's handling of monetary policy, suggested that Powell's job may be at risk if rates do not drop soon. "Though he says Powell's job is safe for now, Trump hinted that he may 'force something' if rates don't drop soon," indicating a growing frustration with the Fed's current stance.

Trump's pressure on Powell comes as the 2024 campaign heats up, with the president seeking to bolster his economic credentials ahead of potential re-election bids. In a series of public statements, Trump has repeatedly called for lower interest rates, arguing that the current economic conditions do not warrant high rates. "We can't get this guy to do it," Trump said of Powell lowering rates, expressing his exasperation with the Fed's reluctance to cut rates. He suggested that the Fed cut interest rates by two full percentage points, a move he believes could save the U.S. significant amounts of money.

Trump's criticism of Powell has been unrelenting, with the president labeling the Fed chair a "numbskull" for not acting on his demands. "Cut your rates now, there's no inflation," Trump urged, dismissing concerns about inflation and emphasizing the need for immediate rate cuts. This stance contrasts with Powell's more cautious approach, which has focused on maintaining stability and avoiding potential economic risks.

Despite his harsh words, Trump has also indicated that he does not plan to fire Powell immediately. "President Trump said he did not plan to fire Fed Chair Jerome Powell, days after saying he would 'soon' pick his nominee to lead the central bank next," suggesting a strategic approach to applying pressure on the Fed. Trump's comments have sparked speculation about the future of Powell's tenure and the potential impact on monetary policy.

Trump has pointed to Europe, where ten rate cuts have already taken place, as an example of how central banks should respond when inflation cools. He believes the US is falling behind and losing economic momentum. This isn't the first time Trump’s administration has gone after Powell in recent days. Commerce Secretary Howard Lutnick and Vice President JD Vance have also attacked the Fed’s stance, calling it “monetary malpractice.” They argue that Powell’s reluctance to cut rates is hurting the economy, especially when inflation is easing and energy prices are dropping.

Even though Trump has the constitutional power to remove Powell, doing so could rattle markets. Legal experts say the move would damage the Fed’s credibility and likely cause long-term interest rates to spike. Trump appears to be aware of this, which is why he hasn’t acted yet. Harvard legal scholars also note that the laws protecting Powell’s position have been slowly weakening in recent years. But despite the legal gray area, the real threat might come from how markets would react. Removing Powell could undermine investor confidence and hurt Trump’s broader economic goals.

With energy prices falling and inflation data remaining stable, Trump’s calls for rate cuts may intensify. But whether the Fed listens or whether Trump acts on his threats remains to be seen. The tension between Trump and Powell highlights the broader debate over the role of the Federal Reserve in shaping economic policy. While Trump advocates for aggressive rate cuts to stimulate economic growth, Powell has been more cautious, citing concerns about inflation and the potential for economic instability. This divergence in views underscores the complex interplay between political pressures and economic realities, with both sides seeking to navigate the challenges of a rapidly changing economic landscape.