The markets and President Trump are piling more pressure on the Federal Reserve to consider a near-term interest rate cut as the tariff market sell-off deepens.
Traders boosted their bets on the number of Fed cuts this year to five and pulled forward their estimate of when those cuts could begin, starting at the next meeting on May 6-7. The odds of a May cut are now above 50%.
President Trump also continues to ramp up his own pressure campaign, saying on Truth Social Monday morning that “the slow moving Fed should cut rates!” He delivered a similar message Friday as Fed Chair Jerome Powell spoke at an event in suburban Washington, D.C.
“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly,” Trump posted Friday, adding, “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
Powell is showing no signs of blinking. He made it clear during his remarks on Friday at an event in Arlington, Va., that the Fed isn’t in a hurry to take any action on rates, saying, “It is too soon to say what will be the appropriate path for monetary policy.”
He also talked about the possibility of higher inflation and a slowing US economy due to Trump’s tariffs, which would be the steepest duties imposed by the US in more than 100 years.
Because it is now clear Trump’s planned tariffs are exceeding expectations, Powell said, “the same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
And the inflation effects, “could be more persistent,” he noted, backtracking from a “base case” view expressed last month that any inflation effects would be “transitory.”
That transitory stance had aligned with a view also expressed earlier by Treasury Secretary Scott Bessent.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Fed Governor Adriana Kugler said Monday that she is now more worried about inflation than the employment side of the central bank’s dual mandate, pointing to how outside economists have pegged the effective tariff rate at 21%-26% — up from 2.6% at the beginning of the year.
“I view right now inflation as being more pressing as far as the effects that we’re already seeing,” Kugler said while speaking at Harvard University.
“It should be consequential,” she added. “We have already started seeing some increases in prices.”
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