Trump Advocates for Fed Rate Cuts to Smooth Transition to His Tariffs

After mostly refraining from intervening in the Federal Reserve’s operations during his initial two months in office, President Donald Trump is now advocating for interest rate cuts as a safeguard for his tariff strategies.

In a post on Truth Social on Wednesday night, Trump urged Chair Jerome Powell and his team to implement a looser monetary policy as the administration moves into the next phase of its assertive trade agenda.

“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs begin to transition (ease!) into the economy,” Trump stated. “Do the right thing. April 2nd is Liberation Day in America!!!”

This statement came just hours after the Powell-led Federal Open Market Committee decided to maintain its benchmark interest rate but indicated that two rate cuts are probable by the year’s end, assuming the incremental adjustments of a quarter percentage point that policymakers generally prefer.

The April 2 reference pertains to when the administration is expected to disclose findings from a study on global trade, likely leading to the imposition of additional tariffs to rectify what it perceives as an unequal competitive environment.

During his post-meeting press conference, Powell reiterated the potential uncertainty surrounding tariffs multiple times, which partly justifies the Fed’s currently cautious approach. He also noted that while the tariffs might elevate inflation in the short term, their effects would likely diminish over time.

“I think that’s kind of the base case. But as I said, we really can’t know that. We’re going to have to see how things actually work out,” he remarked.

However, lower rates could interact with tariffs to drive up inflation. Market expectations suggest the Fed will hold off on cuts until June. Moreover, Fed cuts don’t always translate directly into reduced borrowing rates. In an ideal scenario, lowered rates would assist in sustaining rising prices anticipated from the tariffs.

Unlike his previous term, Trump has so far adopted a more hands-off approach regarding Fed policy. Treasury Secretary Scott Bessent has noted that the White House is more interested in reducing the 10-year Treasury yield to lower long-term borrowing costs than focusing on the short-term federal funds rate controlled by the Fed.

During his last term, Trump criticized Powell and the Fed for hiking rates, labeling them “boneheads” at one point and likening the chair to a golfer unable to make a putt.

Fed projections released Wednesday indicated a potential full percentage point reduction over the next three years for the funds rate, which is currently set between 4.25%-4.5%.