President Trump demands a 2% interest rate cut that could save America $600 billion annually, while blasting Federal Reserve Chair Powell for endangering economic growth through “monetary malpractice.”
Key Takeaways
- President Trump has intensified criticism of Federal Reserve Chair Jerome Powell for refusing to lower interest rates despite controlled inflation.
- Trump argues that a two-percentage-point rate cut could save the United States $600 billion annually while boosting economic growth.
- Vice President JD Vance has labeled the Fed’s refusal to cut rates as “monetary malpractice.”
- The Fed is maintaining current rates due to concerns about inflation, particularly in relation to Trump’s tariff policies.
- Despite harsh criticism, Trump has indicated he won’t fire Powell but may “force something” regarding interest rates.
Trump Calls for Immediate Rate Cuts to Fuel Economic Growth
President Trump has significantly escalated his criticism of Federal Reserve Chair Jerome Powell during a White House event on June 12, pushing for substantial cuts to interest rates. The President emphasized that lowering rates by two percentage points could result in annual savings of $600 billion for the United States, funds that could be redirected toward critical infrastructure and economic development. While acknowledging that rate increases might be necessary if inflation becomes problematic, Trump pointed out that current inflation levels remain manageable, making this the perfect time for monetary easing.
Vice President JD Vance has strongly backed the President’s position, describing the Fed’s reluctance to cut rates as economically damaging. “The president has been saying this for a while, but it’s even more clear: The refusal by the Fed to cut rates is monetary malpractice,” said JD Vance, Vice President of the United States.
President Donald Trump renewed his criticism of Federal Reserve Chair Jerome Powell after the board declined to cut interest rates, but stopped short of repeating his call for Powell to be ousted https://t.co/pMnrrO9WmT
— Bloomberg (@business) May 8, 2025
The Fed’s Resistance and Trump’s Economic Strategy
The Federal Reserve has maintained its current interest rate position due to concerns about potential inflation increases. The central bank’s leadership, particularly Powell, has signaled that the institution is cautious about repeating past mistakes of delayed inflation response. This stance has put the Fed directly at odds with the White House’s economic vision, which prioritizes rapid growth through monetary easing. The tension represents a fundamental disagreement about the proper balance between growth and inflation control in today’s economic environment.
“If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” said Jerome Powell, Federal Reserve Chair.
Powell’s comments reflect the Fed’s position that the administration’s tariff policies could trigger inflation, making interest rate cuts potentially counterproductive. Economic analysts have projected that Trump’s tariffs could push inflation to 3.5%-4% by the end of 2025, complicating the Fed’s monetary policy decisions. This creates a challenging economic paradox for the administration, which desires both protective tariffs and loose monetary policy—goals that many economists view as incompatible without careful calibration.
Trump’s Strategy: Pressure Without Removal
During his recent White House remarks, President Trump clarified that while he strongly disagrees with Powell’s monetary approach, he has no intention of removing him from his position. This stance indicates the President’s preference for applying public pressure rather than administrative action to influence Fed policy. The strategy reflects Trump’s understanding of the markets’ preference for Federal Reserve independence while still communicating his clear economic priorities to both Powell and market participants.
Market predictions currently suggest the Fed may not cut rates until later in the year, with decisions heavily dependent on how inflation responds to tariff implementations. This timeline falls significantly behind the President’s desired schedule for monetary easing. Trump’s economic advisers understand the Fed’s position, but the administration has been vocal about placing responsibility on Powell for any economic headwinds that might result from maintaining higher interest rates while attempting to implement its broader economic agenda.
Economic Impact and Future Outlook
The debate over interest rates represents more than a policy disagreement—it reflects fundamentally different visions for America’s economic future. The Trump administration’s approach prioritizes rapid growth and competitiveness through both protective tariffs and monetary stimulus, while the Federal Reserve remains focused on long-term price stability. For everyday Americans, the resolution of this policy tension will have significant implications for mortgage rates, business investment, job creation, and overall economic prosperity in the coming years.
Economists close to the administration argue that a more accommodative monetary policy would amplify the positive effects of Trump’s pro-growth policies, including tax reforms and regulatory reductions. The President’s focus on the $600 billion in potential savings from lower interest rates highlights his emphasis on reducing government borrowing costs while simultaneously stimulating economic activity. As this economic strategy continues to unfold, the relationship between the White House and the Federal Reserve will remain a critical factor in determining America’s economic trajectory.
