President Trump once again revived his calls for the Fed to cut interest rates. But Wall Street experts say rate cuts won’t necessarily solve the US economy’s problems.
In a Truth Social Post early Monday, Trump said, “The slow-moving Fed should cut rates!”
The statement echoes comments the president made last week, arguing now is the “PERFECT time” for Fed Chair Jerome Powell to cut rates. Markets continued to crater Monday following the latest tariff escalation, with Trump threatening to boost tariffs on China by another 50%. That would be on top of the 54% the administration had already promised.
Wall Street is currently pricing in four interest rate cuts by year-end, largely due to growth fears and the increased probability of a US recession. Powell, though, has given investors few assurances that the recent sell-off would prompt a quick response from the central bank.
In prepared remarks delivered Friday, Powell said, “While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem.”
Julia Coronado, president and founder of MacroPolicy Perspectives, told Yahoo Finance on Monday that Powell’s “wait and see” approach is likely the right move.
“We see risks to both sides of our mandates,” she said. “The ultimate responsibility of the Fed is to be the adult in the room. And right now, that means being patient and letting some of this play out.”
Coronado added the Fed does not have the ability “to just step in and catch the falling knife here” given the inflationary nature of Trump’s proposed tariffs, along with the plummeting US dollar as global markets reassess Us economic strength.
“Every time the market corrects, there’s rumors swirling that the Fed is going to come in and cut rates,” she said. “President Trump is calling on the Fed to come in and cut rates. And by the way, that may not be the antidote you think it is.”
“We’re in an extraordinarily difficult and dangerous situation where there’s not an easy policy solution when policy itself is the problem.”
