Trump says the Fed should cut rates to ease the economy’s transition to his tariffs

President Donald Trump has shifted his stance on Federal Reserve policy, urging Chair Jerome Powell to cut interest rates in response to the administration’s aggressive trade policy. In a recent post on Truth Social, Trump called for rate cuts as the U.S. tariffs take effect, stating that the Fed would be “MUCH better off CUTTING RATES” to support the economy. The message came shortly after the Federal Open Market Committee decided to hold rates steady but hinted at potential cuts later in the year.

The reference to “Liberation Day in America” on April 2 signifies the administration’s upcoming announcement of further trade measures aimed at leveling the playing field. Powell, in a post-meeting press conference, acknowledged the uncertainties surrounding the impact of tariffs on inflation, emphasizing the Fed’s cautious approach in light of these developments.

While lower interest rates could potentially fuel inflation when combined with tariffs, market expectations suggest that the Fed may wait until June before implementing any cuts. Trump’s current focus on Fed policy marks a departure from his previous criticism of Powell and the central bank for raising rates during his first term.

Treasury Secretary Scott Bessent has emphasized the administration’s interest in reducing long-term borrowing costs through adjustments in the 10-year Treasury yield. Despite Trump’s past criticism of the Fed, projections from the central bank indicate a potential decrease of one percentage point in the federal funds rate over the next three years.

Overall, Trump’s call for rate cuts reflects a shift in his approach to monetary policy, aligning with his administration’s trade agenda. The integration of these policies will be crucial in navigating the economic landscape in the months ahead.