Trump Urges Federal Reserve to Lower Interest Rates Amid Economic Concerns

In a time marked by significant political upheaval in the United States, the Federal Reserve has opted to keep the key interest rate unchanged. During a recent meeting, led by Fed Chair Jerome Powell, the monetary policymakers maintained the rate within the range of 4.25% to 4.50%. This decision marks the second pause in rate adjustments this year, following a series of rate cuts after a shift in monetary policy was initiated last September. The Fed has also revised its growth forecast downward.

Following the Fed's decision, President Trump took to his social media platform to call for a reduction in interest rates, urging the central bank to take appropriate action.

Concerns are growing regarding a potential recession in the US, which many attribute to Trump's erratic trade policies. The president's implementation of tariffs has led to increased costs for imported goods, and there are fears that domestic companies might raise prices due to reduced foreign competition. Recent tariffs have been imposed on imports from Canada, Mexico, and China, although some tariffs on Canada and Mexico have been partially rescinded.

Trump's recent comments suggest that he may be acknowledging the possibility of a recession. Typical indicators of an economic downturn include rising unemployment, decreased consumer spending, falling investment levels, and overall economic uncertainty.

The Federal Reserve has indicated that it will not rush into further easing measures. Jerome Powell emphasized during a press conference that the current economic landscape is characterized by unusually high levels of uncertainty. He stated that the Fed is not following a predetermined path but is instead adapting its monetary policy to the evolving situation. Powell remarked that the Federal Reserve is well-positioned to monitor ongoing developments and that it is prudent to wait for clearer signals.

Michael Heise, Chief Economist at HQ Trust, noted that the direction of US government policies regarding trade and immigration will be crucial for future interest rate decisions and the broader economy.

Stephan Bales, an expert from the German Development Bank KfW, pointed out that the Federal Reserve is remaining cautious amid ongoing uncertainty. He indicated that pressure on the Fed may increase with each subsequent pause in rate adjustments this year, as recession fears and a potentially cooling job market loom. Moreover, the trade policies advocated by Trump could jeopardize the Fed's goal of price stability, leading to a complex balancing act for the central bank.

The Federal Reserve has also revealed a new economic forecast, which is more pessimistic than projections made three months prior. The Gross Domestic Product (GDP) of the largest economy in the world is expected to grow by 1.7% this year, a decrease from the earlier estimate of 2.1%.

Inflation expectations have been slightly adjusted upward. The Fed's officials continue to forecast an average interest rate of 3.9% for 2025, consistent with previous estimates, indicating two minor rate hikes may be on the horizon. Since Trump took office, he has imposed significant tariffs on various imports, and the uncertainty surrounding these aggressive trade measures remains one of the primary drivers of inflation, which the Fed aims to control. The central bank targets an inflation rate of 2%.

For the current year, the Fed now anticipates an average inflation rate of 2.7%, slightly higher than previously thought; the December forecast was set at 2.5%. The core inflation rate, excluding volatile food and energy prices, is projected to be 2.8% this year, up from 2.5% in December. This core inflation figure is critical for the Fed's analysis, as it better reflects the underlying price trends by excluding fluctuating components.