President Donald Trump Urges Federal Reserve to Lower Interest Rates

President Donald Trump wants the Federal Reserve to act quickly to lower interest rates, cautioning that U.S. tariffs are impacting the economy.

> “The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump posted on Truth Social. “Do the right thing. April 2nd is Liberation Day in America!!!”

The Federal Open Market Committee (FOMC) recently held a meeting, deciding to keep its benchmark interest rate steady at 4.25%-4.5% for the second consecutive time. However, economic forecasts are changing. The Fed cut its growth projection to 1.7%, down from 2.1% just a few months ago, while inflation expectations rose to 2.8%, up from 2.5%. This suggests the U.S. could face stagflation, characterized by slow growth and rising prices.

Federal Reserve Warns of Economic Risks

The FOMC acknowledged increased uncertainty and emphasized that they are monitoring inflation and economic growth closely, but refrained from cutting rates for now.

Concerns about inflation are rising as Trump’s trade policies begin to affect American businesses. Tariffs on major U.S. trading partners are likely to raise costs for companies and consumers. Fed Chair Jerome Powell stated, “Inflation has started to move up now. We think partly in response to tariffs, and there may be a delay in further progress over the course of this year.” He also noted significant uncertainty and downside risks among businesses and households.

Despite inflation worries, the Fed anticipates cutting rates twice by the end of 2025. The dot plot forecast suggests a 3.9% interest rate by year-end, targeting a range of 3.75%-4%. However, opinions differ: while only one official opposed rate cuts in January, four now believe rates should remain steady for the year.

Markets React as Investors Monitor Economic Data

Stock markets reacted as the Federal Reserve reaffirmed plans to cut rates later this year. Dow Jones futures rose by 71 points, S&P 500 futures increased by 0.3%, and Nasdaq 100 futures climbed by 0.4%.

Markets are attempting to recover from losses that began in February. On Wednesday, the Dow gained 0.9%, the S&P 500 rose 1%, and the Nasdaq Composite added 1.4%. However, the Nasdaq is still in correction territory, over 10% below its peak, while the S&P 500, having briefly entered correction last week, is now 7% off its all-time high and on the verge of breaking a four-week losing streak.

Some investors remain optimistic about inflation. Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, remarked, “The market reaction, to me, suggests that investors believe tariffs and other policies won’t cause lasting inflationary pressures and that the Fed can maintain control.”

Earlier this month, Trump cautioned that the economy may go through a “period of transition” as his tariffs are implemented. He temporarily lifted duties on certain Canadian and Mexican imports, but that exemption will expire on April 2.

Now, investors are awaiting more economic data, including weekly jobless claims, the Philadelphia Fed’s manufacturing survey, and a report on existing home sales due Thursday.