President Donald Trump visited the federal reserve this week and used the time to push interest rate drops again. While the visit was officially to inspect the renovations of the Fed building, Trump made the headlines by calling the president of the Fed, Jerome Powell, to reduce interest rates of 300 base points, saying that it would be “rocket fuel” for the American economy.
“We should be like Switzerland”
Trump, during his visit, argued that the United States should be part of the countries with the lowest interest rates, stressing that Switzerland already has rates close to 0.5%.
On the other hand, the rate of American federal funds remains between 4.25% and 4.5% and has not seen a reduction until now in 2025. Trump has reiterated his request for a reduction of 300 points, claiming that this decision would serve as “rocket fuel” for the American economy, which, according to him, is already strong, with inflation and stable labor markets.
He also criticized the prudent Fed approach compared to Europe, where rate reductions have already started. Trump’s statements are particularly striking because they become before the meeting of the Federal Open Market Committee (FOMC) scheduled later this month.
Increasing pressure inside the Fed
Surprisingly, Trump is not the only one to call cuts. For the first time in almost 30 years, two governors of the Fed, Michelle Bowman and Christopher Waller, should disagree with the majority at the Fed meeting this month and support a drop in rate. This internal fracture shows that even within the Fed, opinions change.
Market reaction
Despite Trump’s pressure, the chances of a rate drop at the Fed meeting from July 29 to 30 remain very low at only 2.6%, according to CME Fedwatch. The FED still wants stronger evidence than inflation goes towards its 2%target. For the moment, traders expect rates to remain between 4.25% and 4.5%.
However, the comments of the president of San Francisco Fed, Mary Daly, aroused discussions. She said that Trump’s prices had not increased inflation and believe that two rate drops in 2025 are still possible. His remarks show that some members of the Fed lean more to endow.
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Meanwhile, financial analysts warn that Powell Trump’s direct targeting by Trump could shake up Fed’s independence. The Wall Street Journal notes that such interference risk higher long -term yields and could paradoxically increase borrowing costs, not lower them.
Powell position under control
Adding to the complexity, the president of the Fed, Jerome Powell, faces a renewed political and legal pressure on the renovation costs of the Central Bank. A recent criminal dismissal to the Ministry of Justice by the representative.
Anna Paulina Luna intensified calls for meticulous examination. Although Trump clarified during his visit that he does not currently plan to fire Powell, the political account surrounding the Fed is warming up, with increasing expectations that Powell could be forced to act on rates before the end of the year.
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Faq
Trump realized to inspect the renovations and urged a rate drop of 300 bp to stimulate the American economy.
Trump wants a reduction of 300 base points, saying that it would serve as a “rocket fuel” for the American economy.
The chances are low – just 2.6%, because the Fed seeks stronger evidence of the drop in inflation.
Powell is under control for renovation costs and Trump’s push for cuts before the FOMC meeting.
