Trump Urges Powell to Slash Interest Rates

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John Awhanjinu

On April 4, 2025, President Donald Trump publicly called for Federal Reserve Chair Jerome Powell to cut interest rates, labeling it the “perfect time” to act. Trump highlighted falling energy prices, a 69% drop in egg prices, and rising job numbers as evidence of an economic window to stimulate growth.

Tariff Policies Stir Market Turmoil

However, his remarks come as financial markets reel from his recent tariff policies, including a 10% baseline tariff on nearly all imports, which has sparked fears of layoffs and price hikes across the U.S.

Trump’s comments, posted on X, directly criticized Powell for being “always late” but offered him a chance to “change his image” by acting swiftly. With inflation down from its 2022 peak of over 7% to 2.5% as of January 2025, and core inflation at 2.6%, Trump argued that rate cuts could deliver a “big win for America.”

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Powell’s Speech Under Scrutiny

Yet, the timing of his statement, just minutes before Powell’s scheduled speech on the economic outlook, puts the Fed Chair in a challenging position. Powell, who has emphasized the Fed’s 2% inflation target and noted recent upticks in near-term inflation expectations tied to tariffs, may now face pressure to address Trump’s demands directly. Analysts expect Powell to maintain his cautious tone, likely reiterating the Fed’s data-driven approach while acknowledging the “increased uncertainty” flagged in the Fed’s March 2025 statement, when it held rates steady at 4.3%.

The broader economic implications of Trump’s push are significant. His tariffs on major trading partners like Canada, Mexico, and China, imposed to address issues like migration and fentanyl smuggling, have already unsettled markets, with the S&P 500 recently dipping into correction territory. Economic forecasts suggest these tariffs could shave nearly 0.4% off real GDP growth through 2028 while pushing inflation up by 0.3% over the next few years. If Powell were to cut rates as Trump demands, it could provide short-term relief by lowering borrowing costs and stimulating investment. However, with inflation still above the Fed’s target and tariffs stoking price pressures, premature rate cuts risk fueling stagflation—a scenario where inflation rises while growth stalls.

John Awhanjinu

Awhanjinu John studied Economics at Redeemers University. He is keen on financial modelling and corporate finance.