The Fed kept interest rates steady at 4.25–4.5%, citing inflation risks and economic uncertainty.
Trump harshly criticized Fed Chair Powell, demanding immediate rate cuts and calling him “stupid” on Truth Social.
Political pressure on the Fed raises concerns over central bank independence and potential market volatility.
On June 18, 2025, the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) announced it would keep the target range for the federal funds rate at 4.25% to 4.5%, marking the fourth consecutive decision in 2025 to maintain rate stability.
In response, President Donald Trump once again publicly criticized the Fed and its Chair Jerome Powell, accusing them of hindering economic growth by refusing to cut rates.
TRUMP’S CRITICISM AND RATE CUT DEMANDS
Trump’s dissatisfaction with the Fed has been longstanding. Following the June 18 FOMC meeting, his criticism escalated.
On Truth Social, Trump called Powell a “stupid person,” even joking that he would do a better job as Fed Chair himself, suggesting he might “appoint himself” to the role.
On June 4, Trump reacted to the May ADP employment report, which showed private-sector job growth had slowed to only 37,000 new jobs, demanding an immediate rate cut and criticizing Powell for being “always too slow.”
He contrasted this with the European Central Bank, which he noted had already cut rates nine times. On June 6, Trump urged a full one-percentage-point rate cut, claiming it would inject “rocket fuel” into the economy.
Trump’s push for rate cuts aligns with his broader economic agenda. His administration’s policies—broad tariffs (including 60% tariffs on China), tax cuts, and mass deportation initiatives—are viewed by many as inflationary and potentially growth-constraining.
He argues that lower interest rates would reduce borrowing costs, spur spending and investment, and offset the drag from tariffs.
He also pointed out that a rate cut would reduce the burden of interest payments on short-term debt, stating, “Cut one point, pay one point less in interest.” He criticized Powell for failing to act on falling oil and food prices, calling it a missed opportunity to stimulate the economy.
Trump’s remarks not only target policy but also challenge Powell’s personal authority. In April, Trump claimed Powell would comply if asked to resign, although Powell has firmly stated that the President lacks legal authority to fire the Fed Chair.
Such open pressure breaks with the longstanding norm of presidential non-interference in monetary policy and has drawn broad attention from both markets and academia.
THE FED’S STANCE AND REASONS FOR HOLDING RATES
In the June 18 post-meeting press conference, Powell refrained from responding directly to Trump’s attacks. He emphasized that Fed policy is data-driven and based on the economic outlook and risk balance, not on political considerations.
Powell reiterated that the Fed’s independence is essential for long-term stability, and that the President has no authority to dismiss the Chair or board members.
The FOMC’s decision to hold rates reflects a cautious view of current economic conditions.
The June 2025 statement noted continued solid economic expansion, low unemployment (around 4.5%), and moderately elevated inflation (with core PCE inflation projected at 3.0%, above the long-term 2% goal).
The FOMC expressed concern that Trump’s tariffs could push up consumer prices, and mass deportations might tighten the labor market, adding upward pressure on inflation.
Moreover, the economic outlook shows GDP growth slowing to 1.4% in 2025, with upward revisions to inflation expectations—prompting the Fed to remain cautious.
The FOMC now anticipates only two rate cuts (totaling 50 basis points) in 2025, possibly not until September or December.
Powell added that monetary policy is shaped collectively, not by any single leader, and suggested that Flexible Inflation Targeting may be better suited to the current environment than Flexible Average Inflation Targeting, signaling a balancing act between inflation and employment.
POLITICAL TENSIONS AND POTENTIAL CONSEQUENCES
The ongoing tension between Trump and the Fed underscores the conflict between monetary policy and political goals.
Trump’s tariff, tax, and deportation policies could fuel inflation while also slowing growth, putting the Fed in a bind: cutting rates may stoke inflation, while keeping them high risks a slowdown.
Some analysts speculate Trump is deliberately applying economic pressure to force the Fed into rate cuts—a calculated strategy.
Trump’s public attacks also threaten the Fed’s independence. Economists warn that if the Fed succumbs to political influence, the U.S. could face Turkey-like consequences, where inflation soared to 80% in 2022.
Powell has consistently emphasized that the Fed must base decisions on long-term economic goals, not short-term political pressures, to maintain market confidence and economic stability.
MARKET RESPONSE AND FUTURE OUTLOOK
Markets responded calmly to the June 18 FOMC decision, as the rate hold was widely anticipated (96.9% probability). However, Trump’s demands and tariff-related uncertainties have caused asset price fluctuations.
For example, in April, when Trump threatened to fire Powell, U.S. stocks and the dollar briefly dipped, rebounding quickly after Trump clarified he had no such intention. With June 19 being a federal holiday (Juneteenth), full market reactions may be delayed until June 20.
Looking ahead, the power struggle between Trump and the Fed is unlikely to ease. Trump may continue to exert pressure through public statements or even executive actions—especially if he tries to replace Powell with a loyalist when Powell’s term ends in May 2026.
The Fed, in turn, must navigate inflation, growth, and political pressure. Current data shows an economy that is stable but uncertain, suggesting rate cuts may be deferred until the second half of 2025.
The next FOMC meeting on July 29–30 and Trump’s policy signals will be key indicators.
In the long term, the Fed’s independence and response strategy will significantly affect U.S. economic stability and global market confidence. If political interference intensifies, it could undermine the Fed’s credibility and trigger market volatility.
Conversely, a continued data-driven approach could help the Fed successfully navigate the dual challenge of inflation and economic growth.
〈Fed Holds Rates Steady，Trump Again Calls Powell “Stupid”〉這篇文章最早發佈於《CoinRank》。
