Why US President Donald Trump Wants Jerome Powell (The Federal Reserve) To Cut Interest Rates, And Will It Happen? 

Every day in global financial markets seems to be another big, eventful one given President Trump and his constant flow of announcements. 

First, there was the “Liberation Day” tariffs, followed by a 90-day pause for most countries but then a massive hike for China. This tit-for-tat tariff war with China continued for a week after the pause. 

Now, though, investors are also starting to fear that the US Federal Reserve could lose its independence to implement (what it deems appropriate) monetary policy for the US economy. 

That’s because on 17 April 2025, President Trump said that Fed Chairman Powell’s “termination cannot come fast enough” and accused the latter of being “too late and wrong” on inflation. 

Now, the markets are anticipating that President Trump is putting pressure on Chairman Powell to cut interest rates, even if the Fed doesn’t think it’s the right time to do so. But why is that the case and can he pressure the Fed Chair to take action? 

Fed’s History Of Political Independence 

First off, it’s important to establish that the Federal Reserve has traditionally been free to operate of political pressure. Indeed, the Fed’s independence was formally established in 1951 after the central bank was originally created in 1913 by an act of Congress. 

As the Fed has operated independently for over half a century now, it has been unsettling for global investors that the central bank now seems to be coming under political pressure from President Trump. 

There was some precedence to this pressure though and, unsurprisingly, it came from President Trump’s first term in power. He made comments in late 2018 that “So far, I’m not even a little bit happy with my selection of Jay” as Chairman of the Fed. 

President Trump also went on to say that the US central bank was “way off-base with what they’re doing”. That came when the Fed was starting to raise interest rates as the US economy was continuing to do well half-way through President Trump’s first term. 

In the end, the Fed did actually cut interest rates in July 2019 – citing uncertainty from President Trump’s tariffs on China. Many market commentators said that was the first instance of political pressure in recent times as the US economy was doing fine in 2019 and the economic data were not flashing any signs of recession.  

Why Does Trump Wants Lower Interest Rates? 

The logic for lower interest rates is simple – it’s a loosening of monetary conditions and that – traditionally – benefits riskier assets such as stocks.  

Therefore, the lowering of interest rates (if there’s no recession) is desirable for investors as it boosts the appeal of stocks as an asset class and, thus, should also technically provide a boost to the US stock market. 

Of course, given the volatility in US stock markets over the past few weeks, alongside some surprisingly strong labour market data, President Trump has decided that he thinks Chairman Powell should take the step of continuing to reduce interest rates. 

The Fed has been in a holding pattern on rates since it last cut interest rates in December 2024 – having held rates steady in its past two meetings. The dynamic has changed since the Fed’s last gathering in March, though, given the Liberation Day announcements and continued higher tariffs on Chinese imports. 

As a result, many analysts are not expecting the Fed to cut interest rates by up to four times this year, up from a previously-expected two rate cuts for the rest of this year. The higher chance of a US recession, given all the economic uncertainty brought about by tariffs, is commonly cited as the key reason why. 

Will The Fed Cut Rates? 

At the moment, it’s difficult to predict whether Trump’s comments will pressure Chairman Powell to cut rates because (as usual) Trump has now seemingly changed his mind and said – on 22 April 2025 – that he has “no intention” of firing Powell. 

However, all the uncertainty from the announced tariffs could force the Fed to act anyway although the exact timing of the next rate cut is hard to determine.  

Many believe it will take place in the Fed’s Federal Open Market Committee (FOMC) meeting in mid-June but there is also one FOMC gathering taking place before that – from 6 – 7 May 2025. 

That could be too soon for the central bank to feel comfortable resuming rate cuts though as it’s likely to want to see another month or two of stabilising/lower inflation. Whatever happens, it won’t be clear whether the Fed’s Chairman has acted under political pressure from President Trump.  

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