In a move that added pressure to the Federal Reserve, the White House called for a significant decrease in interest rates ahead of the Fed’s rate decision meeting held on Tuesday and Wednesday this week. This call came in the context of easing inflation, pushing Fed Chair Jerome Powell to adopt a more accommodative monetary policy stance.
Russell Vought, director of the White House Office of Management and Budget, criticized Powell for repeatedly delaying rate cuts and slammed the $2.5 billion renovation of the Fed headquarters as a “monument to waste.” Vought emphasized the need to lower rates to align with the voices of the American people and the President.
President Trump has been steadfast in his belief that current interest rates are too high and advocated for a “substantial” reduction. The current Fed policy rate range sits between 4.25% to 4.5%, but Trump hopes to see it lowered to just 1%.
On the same day, Howard Lutnick, U.S. Secretary of Commerce, voiced support for Trump’s position in an interview with Fox News, arguing that maintaining the current interest rate levels makes no sense. He stated that with a strong U.S. economy and decreasing deficits, there is room for rate cuts.
In a rare visit to the Fed’s renovation site on the 24th, President Trump inspected the project and later described having a “very good discussion” with Powell about interest rates. Trump interpreted Powell’s positive view of the U.S. economy as a suggestion for rate cuts.
It is important to note that the Fed’s interest rate policies are not solely determined by the Chair but are collectively decided by the Federal Open Market Committee (FOMC). Most FOMC members are currently leaning towards a wait-and-see approach, assessing the potential inflationary impacts of Trump’s tariff increases.
While the Fed cut rates multiple times in 2024 to combat economic slowdown and falling inflation, the policy rate has remained unchanged in the range of 4.25% to 4.5% since the beginning of 2025.
There are diverging views within the FOMC regarding the pace of rate cuts. Committee member Chris Waller, nominated by Trump in the first term, recently stated that the price hikes due to tariffs are likely a one-time shock and may not have a lasting impact on core inflation, indicating potential support for minor rate cuts in future meetings.
Market expectations suggest that if future inflation data continues to remain weak, the Fed may cut rates again as early as the September meeting. Jonathan Gray, CEO of Blackstone, told the Financial Times that with overall inflation easing, the Fed will have room to cut rates. He noted a downward trend in wage and rent increases.