President Donald Trump wants the Federal Reserve to cut interest rates.
Recent data shows inflation has come down dramatically from the high rates seen during the Biden administration, while the unemployment rate has begun to creep higher.
That’s what Trump and others in his administration have wanted to see — and have repeatedly hammered Powell on his refusal to do so.
Powell acknowledged the potential toll of higher rates in his remarks Tuesday.
Many economists now see the economy as heading toward the worst of both worlds, with both inflation and unemployment trending higher.
Interest rate reductions are what President Donald Trump wants to see from the Federal Reserve. According to Fed Chair Jerome Powell, that is not yet possible.
During his regularly scheduled testimony to the Republican-controlled House Financial Services Committee on Tuesday, Powell defended the central bank’s decision to remain unchanged since the beginning of the year, bringing those two opposing visions into conflict.
The U.S. state is at issue. A. economy, as well as its future direction. According to recent data, the unemployment rate has started to gradually rise while inflation has significantly decreased from the high levels observed during the Biden administration.
Congress has tasked the Federal Reserve with maintaining low unemployment and inflation, so in such a situation, it would likely lower its benchmark interest rate to promote more borrowing and boost economic activity, which would enable the hiring of more workers.
Powell has been criticized by Trump and other members of his administration for not allowing that to happen. Overnight Tuesday, the president relaunched his campaign against Powell, amplifying his claims on social media that the economy was doing “great” overall and that there was “no inflation.”. “”.
Powell should lower interest rates now, he said, and raise them later if inflation begins to increase.
Williams, J. Another outspoken opponent of Powell, Pulte, the director of the Federal Housing Finance Agency, joined the chorus in an X post on Tuesday, saying that the Fed chair’s rate decisions are “dangerous” because they are based on his “politicization of the Fed” rather than data. “”.
Pulte, a former housing executive and investor, called Powell’s policies “harm real people who work hard and are just trying to pay their mortgages, credit cards, and auto loans.”.
Powell’s comments on Tuesday recognized the possible cost of higher rates. The Fed is taking a wait-and-see stance, he claimed, due to the risk of rising inflation as well as the uncertainty that Trump’s immigration and trade policies have created.
According to Powell’s prepared remarks, tariffs typically cause a one-time price-growth episode, but the Fed must work to keep it from turning into “an ongoing inflation problem.”. “”.
In answer to inquiries from Rep. Huizenga, R-Mich. Powell admitted that although recent data readings indicated muted inflation, “all professional forecasters,” both inside and outside the Fed, predict that later this year, the rate of price growth will pick up speed.
Powell stated that policymakers anticipate their preferred inflation measure to have increased from 2 percent to 2 percent in May, and that the rate of inflation is still higher than the Fed’s 2 percent target.
With both inflation and unemployment on the rise, many economists now believe that the economy is headed toward the worst of both worlds. This is commonly known as stagflation, and it can lower people’s purchasing power and depress the U.S. S. economics.
