Trump agTrump again pushes Powell to drop interest rates ‘IMMEDIATELY’ — but a zero-cut year looks increasingly likely
President Donald Trump may have his focus set on the conflict in the Middle East, but he’s still finding time to harrass Fed chairman Jerome Powell.
The U.S. and Israel’s military action in Iran has led many on Wall Street to the conclusion that any rate cuts in 2026 are on increasingly thin ice, owing to high oil prices fuelling inflation.
But Trump seems undeterred in his pressure campaign against the central bank. Writing on Truth Social yesterday evening, the president said: “Where is the Federal Reserve Chairman, Jerome “Too Late” Powell, today? He should be dropping interest rates, IMMEDIATELY, not waiting for the next meeting!”
Trump seems to be appealing to Powell for intervention as oil prices spiralled higher yesterday, once again hitting $100 a barrel. Inflation expectations are rising as a result, as consumers and businesses prepare for the rates to be passed through into their gas and energy prices.
If Powell were to cut rates, it would theoretically reduce some household and operational costs by making borrowing cheaper. In reality, for households hoping to reduce their overheads by securing cheaper mortgage rates, it takes considerably longer for a lower rate to trickle through.
The president also signalled that increasing oil prices are less of a concern to him than dismantling the Iranian regime. On Truth Social last night, he noted that the U.S. “makes a lot of money” when oil prices go up, but said, “of far greater importance … is stopping an evil empire, Iran, from having nuclear weapons, and destroying the Middle East and, indeed, the world.”
The rate-setting Federal Open Market Committee (FOMC) is due to meet next week, with investors overwhelmingly expecting a hold. The CME’s FedWatch barometer is tracking a more than 99% chance of a hold this month, rising in recent days amid chaos in the Middle East.
It is now “entirely plausible” that the FOMC won’t cut at all this year, argued EY-Parthenon chief economist, Gregory Daco, in a note to clients last night—even with a new Fed chairman installed this spring.
Daco wrote: “Fed officials are likely to resume easing only for clear ‘good’ reasons—more rapidly and sustainable progress toward the 2% inflation target—or clear ‘bad’ reasons—a meaningful deterioration in labor‑market conditions.”
The labor market has been a concern for economists over the past year. Powell has observed a stagnant, low-hire, low-fire environment. And a more optimistic jobs report at the start of the year was more recently damped by the latest data from the Bureau of Labor Statistics: While the unemployment-rate is 4.4%, nonfarm payroll employment decreased by 92,000 in February.
Source: YahooFinance