President Donald Trump has urged the Federal Reserve to cut interest rates to combat the effects of his tariffs on the economy. The central bank has largely stayed out of the way during Trump’s presidency, but with a new trade policy in place, the Fed is expected to take action.
Trump encouraged Chair Jerome Powell and his colleagues to ease policy as the administration enters its next phase of aggressive trade policy. The Fed’s key interest rate remains steady for now, but officials indicated that two rate reductions are likely by the end of the year.
The decision comes ahead of a study into global trade, set to be released on April 2nd, which is expected to lead to further tariffs. Trump sees cutting rates as a way to mitigate the impact of these tariffs and stabilize the economy.
However, markets expect the Fed to wait until June before making any changes. Lower interest rates could combine with tariffs to fuel more inflation, but officials believe that the impacts will recede over time.
The Fed has taken a cautious approach on tariffs in the past, citing their uncertain impact on the economy. Trump’s previous comments on the issue have been less measured, and he has even publicly berated Powell and the Fed for raising rates. Despite this, the White House is focused on reducing long-term borrowing costs rather than short-term interest rates.
A full percentage point of cuts in the funds rate are projected over the next three years, according to the Fed’s latest projections.
Source: https://www.cnbc.com/2025/03/20/trump-says-the-fed-should-cut-rates-to-ease-the-economys-transition-to-his-tariffs.html