President Donald Trump has once again turned up the heat on the Federal Reserve, publicly pressuring the central bank to cut interest rates ahead of its May 7 meeting. In a post on Truth Social, Trump accused the Fed of being “TOO LATE AND WRONG,” arguing that further rate reductions are essential to stimulate growth and cushion the economy against what he describes as self-inflicted economic wounds from high tariffs.
Trump’s criticism underscores his broader economic stance, which often calls for lower borrowing costs to encourage investment and consumption. With the 2024 election cycle heating up, Trump has also been linking economic performance directly to monetary policy, effectively tying the Fed’s independence to the political battlefield. His calls for rate cuts come even as inflation remains above the central bank’s 2% target, complicating the path forward for Chair Jerome Powell and other FOMC members.
Despite Trump’s loud appeals, the Fed has maintained its data-dependent stance. Powell, in an April speech, emphasized patience amid economic crosscurrents, signaling no rush to move rates either up or down. The central bank’s credibility hinges on its independence, and history shows that political pressure rarely sways monetary policy decisions
Fed Expected to Hold Rates Steady on May 7
According to CME Group’s FedWatch Tool, there is a 99% probability that the Federal Reserve will leave its benchmark federal funds rate unchanged at its current range of 4.25% to 4.5% during its May 7 decision. The rate has remained at that level since December 2024, when the Fed last made a reduction.
This week’s meeting of the Federal Open Market Committee (FOMC) comes at a critical juncture, as the economy sends conflicting signals. While inflation has cooled modestly, it still remains above target. At the same time, GDP surprisingly contracted in the first quarter, raising fears of a potential slowdown. Despite this, job growth in April exceeded expectations, suggesting that the labor market remains robust for now.
Economists caution that these mixed indicators make it difficult for the Fed to justify a rate cut. “There isn’t a good reason to change rates at this point,” said Scott Helfstein of Global X. “The Fed is likely to reiterate the need for more data, with three rate cuts currently priced in for later in 2025.” Fed Chair Jerome Powell is expected to stick closely to this message in his May 7 press conference.
Economic Headwinds: Tariffs and Recession Fears
The economic landscape is becoming increasingly volatile, in large part due to the Trump-imposed tariffs on Chinese imports, which have introduced new inflationary pressures. The latest wave of tariffs — imposing a 145% duty on certain Chinese goods — is already being felt by consumers in the form of higher prices across online platforms like Amazon, Temu, and Shein.
These cost increases, coupled with a surprise dip in first-quarter GDP, have prompted leading Wall Street firms such as Goldman Sachs and JPMorgan to raise their recession risk projections for the U.S. economy. Although corporate earnings remain strong, investor sentiment is beginning to fray under the pressure of policy uncertainty and tighter consumer budgets.
“The Fed and investors find themselves in a no man’s land,” Helfstein noted. “We’re waiting to see whether these economic policies drive prices higher and growth lower.” For the Fed, which is charged with balancing price stability and full employment, the calculus becomes especially tricky when external shocks — like tariffs — cloud the economic outlook.
Trump’s Criticism Unlikely to Influence Powell
Despite Trump’s very public campaign for lower rates, economists say it is unlikely to sway the Fed. “Criticism from President Trump will not trigger a Fed policy response,” said Jan Hatzius, chief economist at Goldman Sachs, in a May 6 research note. He added that the Fed would only cut rates in response to meaningful labor market deterioration and anchored inflation expectations.
Jerome Powell, appointed by Trump himself in 2018 and later reappointed by President Biden, has shown a consistent commitment to maintaining the Fed’s independence. His leadership has been marked by careful messaging and a methodical, data-driven approach to monetary policy — even in the face of intense political pressure.
Powell’s anticipated remarks at the 2:30 p.m. press conference on May 7 are expected to reinforce the Fed’s steady-handed approach. Rather than reacting to political noise, Powell is likely to stress that the central bank remains focused on long-term goals and that any rate changes will depend on sustained evidence of slowing inflation and economic weakening.
When Might Rate Cuts Actually Happen?
Although the Fed is unlikely to act this week, economists believe rate cuts are still on the horizon — just not yet. The consensus is that the Fed could begin lowering rates in the second half of 2025, possibly starting in the summer, if inflation continues to trend down and labor market indicators begin to soften.
For consumers burdened by high mortgage and credit card rates, this means they may have to wait several more months before experiencing any relief. The delay also carries significant political implications, as interest rates — and the broader economy — are likely to remain a key topic throughout the 2024 campaign.
In the end, while Trump may be amplifying his demands ahead of the Fed’s May meeting, Powell and his colleagues seem poised to stay the course. The message from the Fed is clear: monetary policy isn’t made on social media, but in response to hard data and economic fundamentals. Whether or not Trump agrees, that’s unlikely to change anytime soon.
