- Trump demanded a 3-point Fed rate cut, claiming it would save $1 trillion, despite a CPI rise to 2.7% in June.
- The Fed is hesitant to cut rates due to inflationary effects from tariffs, with market odds of a rate hold now at 97.4%.
- Trump intensified his criticism of Powell and suggested firing him, citing rising renovation costs at the Fed as potential grounds.
President Donald Trump took to Truth Social early Monday to pressure the Federal Reserve into slashing interest rates, despite signs that inflation remains slightly elevated. Trump called for a dramatic 3-point rate cut, claiming it would save the U.S. economy $1 trillion annually. His posts coincided with the Bureau of Labor Statistics’ release of new consumer price index (CPI) data, which showed inflation ticking up modestly in June.
Headline CPI rose to 2.7% year-over-year, above economist expectations, while core CPI—which excludes food and energy—came in at 2.9%, a touch cooler than forecast. Still, Trump framed the numbers as evidence of “very low inflation” and argued that rates should already be well below 1%.
Inflation Data Complicates Fed’s Path Forward
While Trump pushes for aggressive rate cuts, the Federal Reserve is facing a more cautious landscape. The uptick in CPI, along with looming inflationary pressures from incoming tariffs, has made the central bank wary of cutting too soon. Fed Chair Jerome Powell recently said that the Fed might have already lowered rates if not for the inflationary impact of tariffs.
Market expectations reflect that hesitation. Following the CPI release, the CME FedWatch tool showed a reduced probability of a July rate cut—from 93.8% down to 97.4% odds of no change. The outlook for a cut in September also dimmed, with a 42.2% chance of holding rates steady.
Trump’s Harsh Words for Powell and the Fed
Trump didn’t stop at policy suggestions—he went on the offensive, calling Powell a “knucklehead” and repeating his long-standing critique of the Fed’s interest rate strategy. He also floated the idea of firing Powell, though legal experts note he lacks that authority unless it’s “for cause.”
Some within Trump’s camp are now eyeing a $600 million cost overrun in the Fed’s building renovations as a potential justification. The renovation’s budget has ballooned from $1.9 billion in 2019 to over $2.5 billion, due to material cost hikes and unexpected asbestos and contamination issues.
