Trump Pressures Powell as September Decision Looms
The Federal Reserve is under mounting pressure, not just from shifting economic signals but from President Trump himself. As inflation shows signs of softening and employment data raises questions about the economy’s true strength, Trump has publicly demanded immediate rate cuts, calling current policy “too tight” and labeling Fed Chair Jerome Powell “Too Late Powell.” But Powell and much of the central bank remain cautious, creating the deepest divide inside the Fed in decades.
This week’s July meeting is expected to end without any change to the benchmark rate, which currently sits around 4.3%. However, the real drama lies in what may happen in September—and the growing possibility that multiple Fed governors will break ranks in favor of rate cuts, a rare event that hasn’t happened since 1993.
Three Camps Inside the Fed
The Federal Open Market Committee (FOMC), which sets rates, is now split into three camps:
- The Cautious Middle – Led by Chair Powell and officials like San Francisco Fed President Mary Daly and Boston Fed President Susan Collins, this group wants to see at least two more months of labor and inflation data before making any move. They believe inflation risks from Trump’s new tariffs could still emerge. Powell has stressed patience, saying, “As long as the U.S. economy is in solid shape, we think the prudent thing to do is wait and learn more.”
- The Immediate Cut Advocates – Governors Christopher Waller and Michelle Bowman, both Trump appointees, argue that the Fed should act now to prevent job losses. Waller believes the labor market is weaker than it looks and says, “We should not wait until the labor market deteriorates before we cut the policy rate.” Bowman, who dissented in 2023 and supported gradual cuts in late 2024, has again indicated she’s ready to move now.
- The Hawkish Holdouts – Officials like Atlanta Fed President Raphael Bostic and St. Louis Fed President Alberto Musalem are warning against premature action. They worry that tariffs, though slow to affect prices so far, could still fuel another wave of inflation. “The outlook is for inflation to increase going forward,” Musalem said, and Bostic added, “The discussions of inflation haven’t really dissipated at all.”
The Pressure Campaign from Trump
Trump’s efforts to sway the Fed have intensified in recent weeks. He has publicly criticized the central bank’s building renovation project, suggested Powell is wasting taxpayer money, and even visited the Fed’s headquarters in what many see as a symbolic challenge to Powell’s authority.
The president’s economic logic is also in conflict with the Fed’s traditional framework. Trump argues that a strong economy justifies lower interest rates, comparing the U.S. to a blue-chip company that deserves cheaper borrowing. Most economists—and Powell—disagree. “Our interest rates are higher because our economy’s doing fairly well, not in spite of it,” said TD Securities strategist Gennadiy Goldberg.
Trump’s goal is to cut rates deeply—possibly to 1%—but the Fed’s own projections suggest only two cuts this year and one in 2026. That gap reflects a fundamental disconnect between the White House and the central bank.
Who Are the Key Fed Players?
- Jerome Powell (Chair) – Appointed by Trump and renominated by Biden, Powell has sought consensus but faces growing dissent. His term ends in May 2026.
- Philip Jefferson (Vice Chair) – A quiet but influential voice, Jefferson has supported Powell’s cautious approach.
- Michelle Bowman (Vice Chair for Supervision) – Former Kansas bank regulator, Trump appointee, and increasingly vocal advocate for near-term cuts.
- Christopher Waller (Governor) – Trump appointee and former St. Louis Fed official, seen as a potential successor to Powell. A strong intellectual force backing immediate cuts.
- Lisa Cook, Michael Barr, Adriana Kugler (Governors) – Biden appointees who have mostly supported a cautious wait-and-see policy.
- John Williams (New York Fed) – Powell ally and key voice, supporting a modestly restrictive stance.
- Regional Presidents (Voting Members) – Raphael Bostic (Atlanta), Susan Collins (Boston), Austan Goolsbee (Chicago), Alberto Musalem (St. Louis), and Jeffrey Schmid (Kansas City) each bring diverse regional views, with opinions spread across all three camps.
September Outlook: Will the Fed Cut?
Although this week’s meeting will likely end with no change, attention is turning to the next one in September. According to the CME FedWatch tool, markets are pricing in a 60% chance of a rate cut by then. Goldman Sachs now forecasts a 25-basis-point cut in September, followed by two more cuts in October and December. Others, however, believe the Fed will hold off until later in the year.
Former Fed officials say the real issue may not be inflation or jobs, but communication and politics. “Whether the Fed cuts this week, in September, or later this fall is likely to matter little for inflation or unemployment,” said William English, a former Fed adviser. “These decisions are ultimately about the communication and politics.”
Public and Wall Street Opinions
Wall Street is split. Some strategists, like Piper Sandler’s Michael Kantrowitz, argue that rate cuts are overdue and the Fed is being too cautious. Others, like Jeff Schulze at ClearBridge Investments, believe the Fed will hold out longer than the markets expect.
Meanwhile, Trump continues to hammer Powell. “Our Fed Rate is AT LEAST 3 Points too high,” he wrote recently on Truth Social. Yet on a joint appearance with British Prime Minister Keir Starmer, he held back slightly, saying, “We’re doing so well, even without the rate cut. But a smart person would cut.”
That kind of rhetoric may wear down the Fed’s unity over time, but for now, the institution is holding the line—barely.
As one former Fed insider put it, the Fed moves like a supertanker, not a speedboat. But with Waller and Bowman ready to dissent, and political heat rising, the ship may soon begin to turn.
FAM Editor: We side with Trump in this case. As he mention each 1% fall in the Fed rate save almost $400 Billion in interest per year on our national debt. This is worth it. If Trump gets everything he wants, the tariffs, the DOGE cuts, the budget cuts and the Fed rate lowered to 1%, he can come close to cutting our deficit in half. This is worth doing.
