Initially supported by President Trump, Fed Chair Jerome Powell faces increasing pressure amid a changing political climate.
Trump's Frustration and Pressure on the Fed
President Donald Trump demonstrates dissatisfaction with the pace of lowering interest rates, indicating a desire to replace Jerome Powell this summer. While some of Trump’s own appointees are already advocating for cuts, most of the Fed’s voting members still believe that current levels should be maintained.
Internal Divisions Within the Fed
Tensions are rising among Fed members. Two members, Michelle Bowman and Christopher Waller, openly advocate for a rate cut, while a larger group, including key reserve bank presidents, argues there is no rush. In this context, Bowman, who was against rate cuts last year, unexpectedly expressed her support for a July cut.
Risks and Economic Forecasts
Concerns related to trade tariffs and their potential impact on the economy are becoming a point of contention within the Fed. Powell highlighted inflation worries in congressional hearings, but rate cut supporters argue that the spiral risk is no longer relevant. Meanwhile, other Fed officials caution against rash actions, fearing that economic data may warrant a more cautious approach.
As July approaches, the Fed faces pressure from the President and internal divisions, which may lead to policy changes depending on the economic situation.
