It was a somewhat contentious, even humorous exchange — if it can be called that — that took place over the last two days between President Donald Trump and Federal Reserve Board Chairman Jerome Powell.
The President noted in a post yesterday morning on Truth Social that the European Central Bank (ECB), the central bank for the Eurozone, has cut its rates multiple times, while the United States’ equivalent Federal Reserve Board has yet to take such action this year.
The ECB has cut its benchmark deposit rate three times this year, bringing it down to 2.25%. The latest cut, announced yesterday, was part of a series of rate cuts going back to June 2024, according to CNBC.
President Trump took aim specifically at Fed Chairman Jerome Powell, taunting Powell with the nickname “Too Late,” contending Powell is “always too late and wrong.” The President referenced Powell’s economic report from Wednesday, April 16, calling the report a “complete mess.”
Further, the President yearned for a change of leadership at the Fed: “Powell’s termination cannot come fast enough!”
In the April 16 brief economic report the President referenced, Powell pointed to the speed of economic matters taking place, like tariffs — ironically, since he’d been poked fun at for being “Too Late” and slow with rate cuts. Powell somewhat whimsically referenced the character Ferris Bueller, famously portrayed by actor Matthew Broderick in the 1986 film Ferris Bueller’s Day Off.
“As that great Chicagoan Ferris Bueller once noted, ‘Life moves pretty fast.’ For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said in his speech at the Economic Club of Chicago in Chicago, Illinois.
Powell has said that the Fed is in no hurry to cut rates this year, and has indicated that one or perhaps two rate cuts could be coming in 2025. Yet, after stock market turmoil and spiking economic uncertainty last week, some economists and analysts expect more rate cuts from the Fed could be likelier, should the U.S. economy find itself on shaky ground.
Watching and waiting
So far, though, regarding rate cuts, Powell’s response could be summed up in a single word: Nope.
“Despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position,” Powell contended. “The labor market is at or near maximum employment. Inflation has come down a great deal but is running a bit above our 2% objective.”
And on that point, “inflation has significantly eased from its pandemic highs of mid-2022 without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down high inflation,” he noted.
For his part, Powell did call out “substantial policy changes” by the Trump Administration regarding trade, immigration, fiscal policy, and regulation. “Those policies are still evolving, and their effects on the economy remain highly uncertain,” he said.
Powell expressed something approaching surprise and/or concern over President Trump’s tariffs: “The level of the tariff increases announced so far is significantly larger than anticipated,” he said. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
But, Powell said the Fed remains in a mode, effectively, of watching and waiting to see what happens. “As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy, and hence for monetary policy,” he asserted.
In closing, Powell emphasized the Fed’s mandates of maximum employment and price stability, noting that the Fed may end up in a difficult position in that regard.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” he told listeners. “If that were to occur, we would consider how far the economy is from each goal,” Powell said, adding that the Fed will continue to analyze incoming data and monitor the economic outlook.
In the meantime, “we understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses,” Powell acknowledged.
