Trump Pressures Fed to Cut Rates by 1%

Trump Pressures Fed to Cut Rates by 1% – Signals Powell Replacement Is Imminent

Former President Donald Trump has intensified his criticism of Federal Reserve Chair Jerome Powell, demanding a 1 percentage point rate cut and signaling that Powell’s tenure may soon be over.

Speaking on June 6 (local time) following a stronger-than-expected U.S. jobs report, Trump argued that the Federal Reserve is “dragging its feet” and that Powell should act immediately to stimulate the economy.

“If inflation rises, we can just raise rates again. It’s that simple,” Trump said, taking a direct swipe at Powell’s cautious approach.

“Powell’s Term Ends Soon”

Trump further stated, “Powell’s term ends in May next year. His successor is coming soon,” implying that plans are already underway to replace the Fed chair. In an Air Force One interview, he confirmed that he is “considering Powell’s replacement” and will “make an announcement soon.”

Trump also took to social media, branding Powell as “too slow” and claiming a full percentage-point rate cut would be “rocket fuel” for the U.S. economy.

Fed Policy Diverges from Trump’s View

The Federal Reserve is expected to hold rates steady at its June 17–18 meeting, following a year of rate pauses. Most Wall Street analysts forecast the first potential rate cut only in September, assuming inflation continues to moderate.

Trump, however, is pressing for earlier and deeper cuts, citing a strong labor market and the burden of high interest rates on government debt.

“There’s no inflation right now. With our short-term debt structure, we should lower rates immediately and raise them later if needed,” Trump said.

Debt Costs and Political Pressure

U.S. government borrowing costs are indeed rising. The average interest rate on federal debt is now 3.36%, above pre-pandemic levels. In 2023, interest payments accounted for 3.06% of GDP, the highest since 1996—equivalent to the entire U.S. defense budget.

While Trump and the GOP have pledged fiscal discipline, his new tax-cut proposals could increase the federal deficit. The Congressional Budget Office (CBO) estimates these policies could add $551 billion in additional interest payments over the next decade.

Musk-Trump Rift Adds to the Drama

Tensions around Trump’s tax plan even sparked a public feud with Elon Musk, who criticized the bill as being hastily passed without proper review. Trump responded by questioning Musk’s motives and political allegiance, fueling further controversy.