President Donald Trump is once again criticizing Federal Reserve Chair Jerome Powell for moving too slowly in cutting the federal funds rate.
In a Truth Social post Thursday, Trump said that Powell should have cut rates “long ago,” pointing out that the European Central Bank has lowered rates seven times over the past year.By contrast, the monetary-policy-setting Federal Open Market Committee cut rates three times in 2024, with further rate cuts expected in 2025.
This post is just the latest example of the president taking aim at the central bank. Just days before the Federal Reserve’s January 2025 meeting, Trump told economists in a virtual address that he would “demand that interest rates drop immediately” in response to falling oil prices.
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Tariffs Have Complicated the Case for Rate Cuts
Trump’s condemnation was in response to Powell’s remarks before The Economic Club of Chicago on Wednesday, when he told economists that tariffs are “highly likely” to contribute to inflation that’s “more persistent.” The central bank has a dual mandate of stable employment and price stability, and these goals don’t always move in perfect tandem.
“Unemployment is likely to go up as the economy slows, in all likelihood, and inflation is likely to go up as tariffs find their way and some part of those tariffs come to be paid by the public,” Powell said.
Translation: Interest rates could be higher for longer in part due to the Trump administration’s policy decisions.
However, the Fed already lowered its benchmark rate by a full percentage point in 2024, and it’s unclear when the first rate cut of 2025 may come. Powell elaborated Wednesday that the Fed will “wait for greater clarity” when adjusting monetary policy.
The president doesn’t have authority over the Fed’s monetary policy, which is one reason Trump is unlikely to deliver on his campaign promise of bringing back record-low mortgage rates.
No, Trump Can’t Lower Interest Rates
Donald Trump can “demand” lower rates in the same way that a 5,800-member Facebook group can “demand” that Taco Bell bring back the Enchirito. It doesn’t mean the Fed (or Taco Bell) will act accordingly.
While it is possible for Trump to wage a public pressure campaign against the Federal Reserve, the president can’t compel policymakers to move the benchmark interest rate. The Fed is a nonpartisan federal agency, so Trump’s remarks are “obviously a problem for the notion of central bank independence,” says Francesco Bianchi, economics professor at Johns Hopkins University, in a statement.
This isn’t the first time a U.S. president has tried to coerce the Federal Reserve to lower interest rates for political gain. Back in the 1970s, when inflation was even more rampant than it is in the 2020s, former President Nixon pressured Fed Chair Arthur Burns to cut rates. This scandal was largely overshadowed by Watergate during Nixon’s presidency — but in today’s political climate, it’s a relevant history lesson.
Unlike Burns, Fed Chair Powell has a proven track record of resisting political pressure. For starters, Powell was initially appointed to his position by Trump in 2017 and subsequently served under former President Joe Biden. During his tenure, Powell has made it clear (again and again) that he isn’t beholden to political interests. His primary commitment is to the Fed’s dual mandate of stable prices and maximum employment. Powell also said he will not resign before his term as Fed chair expires in May 2026 — even if asked by Trump.
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Lowering the Fed Rate Won’t Necessarily Lower Mortgage Rates
On the campaign trail, Trump previously said he would bring back 2% mortgage rates by beating inflation. However, it’s not that simple. Mortgage rates are influenced by a host of factors, and they don’t necessarily track the federal funds rate.
“The interesting aspect is that it is not clear that making this kind of request will actually lower longer-term and mortgage rates, that largely depend on expectations and risk,” Bianchi says.
Mortgage rates are expected to stay elevated into 2025, so consumers shouldn’t hold out hope for record-low mortgage rates just a few days into Trump’s second term.
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Trump Can’t ‘Demand’ Lower Interest Rates From Fed originally appeared on usnews.com
Update 04/17/25: This story was previously published at an earlier date and has been updated with new information.
