Trump urges Fed to cut rates 300 bps as Powell resists political pressure

Trump has escalated his public criticism of Federal Reserve Chair Jerome Powell, accusing him of maintaining excessively high interest rates that hinder economic growth and increase borrowing costs for businesses and consumers [1]. The has labeled Powell a “stubborn moron” and “too stupid” and has called for his removal if the Federal Reserve does not significantly reduce rates [2]. Trump has consistently advocated for a 3-percentage-point cut in the Fed’s benchmark rate, which he believes would stimulate the economy [3].

Despite Trump’s pressure, the Federal Reserve has held its benchmark rate steady, with Powell emphasizing the need to evaluate the inflationary effects of Trump’s tariff policies before making any changes [4]. Two Fed governors, Christopher Waller and Michelle Bowman, have supported limited rate cuts, though not to the extent Trump has demanded [5]. Recent employment data, including a modest 73,000 jobs added in July and revised figures for May and June of 14,000 and 19,000, respectively, indicate a slowdown in the economy [6].

Trump has also hinted at replacing Powell before his term ends in May 2026. However, a Supreme Court ruling in May determined that Trump cannot remove Powell based solely on policy disagreements [7]. The White House has since shifted focus to potential issues, such as cost overruns in the Fed’s $2.5 billion renovation projects, as possible grounds for termination [8].

Analysts warn that a large rate cut, as Trump has proposed, could inject too much liquidity into the economy and risk a resurgence in inflation. The Fed’s preferred inflation measure currently stands at 2.6%, slightly above its 2% target [9]. The administration’s push for aggressive rate cuts highlights the ongoing tension between political pressure and the Fed’s dual mandate of price stability and maximum employment [10].

Sources:

[1] https://www.pbs.org/newshour/politics/trump-demands-that-federal-reserve-board-wrest-full-control-of-central-bank-from-fed-chair-powell

[2] https://abcnews4.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

[3] https://www.bostonglobe.com/2025/08/01/business/trump-powell-tariffs-federal-reserve/

[4] https://www.aol.com/finance/powell-didn-t-just-refuse-101449802.html

[5] https://www.sfgate.com/business/article/trump-calls-on-federal-reserve-board-to-wrest-20797538.php