President Trump is calling for lower interest rates after the Federal Reserve holds them steady amid uncertainty over his plans for tariffs on imported goods.
Rejecting the traditional independence of the central bank, Trump Thursday called on the Fed to “do the right thing” and lower borrowing costs to keep the economy humming as he imposes taxes on imported goods that most economists believe will increase inflation.
“The Fed would be MUCH better off CUTTING RATES as U.S.Tariffs start to transition (ease!) their way into the economy,” Trump wrote on his social media site.
Trump hyped the impending next round of tariffs coming on April 2 as “Liberation Day in America.”
The Fed voted Wednesday to keep rates steady for a second straight month after lowering them at the previous three monthly meetings.
Fed Chair Jerome Powell said the impact and extent of Trump’s tariff plan remains unclear.
But the central banker said tariffs could lead to more inflation and would likely prevent policymakers from lowering rates as much and as quickly as they might otherwise do as the economy softens.
Fed governors expect the bank to lower rates twice during 2025.
The Fed would likely keep interest rates higher to keep a lid on inflation, which is still significantly above its 2% target. But it might want to lower rates to keep the labor market strong as the economy slows down after a years-long post-pandemic boom.
It Trump’s tariffs raise prices for consumers, as most economists suspect, it might put the Fed in a tough bind of having to choose between fighting inflation or lowering rates to boost the economy.
“I think we were getting closer and closer” to price stability, Powell said in a press conference. “I wouldn’t say we were at that. … I do think with the arrival of the tariff inflation, further progress may be delayed.”