Key Takeaways
- The Federal Reserve is likely to cut its benchmark interest rate by a quarter-point to a range of 4% to 4.25%, but that is far short of the massive rate cuts President Donald Trump has demanded.
- In a social media post on Monday, Trump said Fed Chair Jerome Powell should make a rate cut “bigger than he had in mind.”
- Trump has said the Fed should cut rates by at least three percentage points, six times as large a cut as the Fed is expected to make.
The Federal Reserve is expected to cut its key interest rate Wednesday, but it could be a fraction of the reduction President Donald Trump has asked for.
On Monday, President Donald Trump renewed demands for the central bank to cut the fed funds rate significantly. The central bank’s influential interest rate dictates the borrowing costs at which banks lend money to one another, affecting interest rates on all kinds of loans.
The Fed has held interest rates high enough to restrict the economy all year out of concern that Trump’s tariffs will fuel inflation. Trump has needled the Fed to lower rates, nicknaming Fed Chair Jerome Powell “Too Late” for his cautious approach. In a social media post on Monday morning, Trump said the rate cuts Fed officials are considering aren’t steep enough.
“‘Too Late’ must cut interest rates now, and bigger than he had in mind,” Trump wrote.
The Fed does indeed seem likely to cut interest rates, but not nearly by as much as Trump has repeatedly demanded.
Financial markets are pricing in a 96% chance the Federal Open Market Committee will reduce the fed funds rate by a quarter point when it next meets on Wednesday, according to the CME Group’s FedWatch tool. The tool forecasts rate movements based on fed funds futures trading data.
But Trump is advocating for a much larger cut. In July, Trump said the fed funds rate was “at least” three percentage points too high.
Trump has pressured the Fed to lower rates, arguing that it would reduce the interest the government pays on the national debt and push down mortgage rates. However, some experts say rapid rate cuts could backfire.
In addition to demanding cuts, Trump has taken steps to take control of the central bank, which is independent of direct control of the White House.
Source link