US President Donald Trump said that the US Federal Reserve should cut interest rates, splitting with the central bank as officials weigh the economic cost of his tariffs.
“The Fed would be MUCH better off CUTTING RATES as US Tariffs start to transition (ease!) their way into the economy,” Trump said in a post on Truth Social. “Do the right thing. April 2nd is Liberation Day in America!!!”
Trump’s post on Wednesday evening came as his administration prepared to unveil a fresh wave of tariffs, which Fed Chair Jerome Powell signaled was hanging over forecasts.
Photo: AFP
Fed officials on Wednesday held their benchmark interest rate steady for a second straight meeting, in a target range of 4.25 to 4.5 percent, and said the central bank would further slow the pace at which it is reducing its balance sheet.
New rate projections showed Fed officials penciled in a 0.5 percentage points of rate cuts this year, according to the median estimate. That implies two 0.25 percent rate reductions, the same number as officials estimated when they last issued projections in December last year.
In their fresh economic forecasts, officials raised the median estimate for core inflation, which strips out volatile food and energy prices, at the end of this year to 2.8 percent from 2.5 percent. Their outlook for this year’s economic growth cooled to 1.7 percent from 2.1 percent.
They raised their estimate for unemployment to 4.4 percent by the end of this year, from the 4.3 percent they forecast in December last year.
“Uncertainty around the economic outlook has increased,” the committee said in a statement.
Officials also removed prior language stating that risks to achieving their employment and inflation goals were roughly in balance.
Speaking to reporters following the two-day meeting of the Federal Open Market Committee, Powell downplayed simmering concerns about a slowdown, but acknowledged tariff uncertainty was a factor and already contributing to goods inflation, but could prove transitory.
“As I’ve mentioned, it can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action by us, if it’s transitory,” Powell said.
He called that scenario the “base case,” but then hedged, saying officials “really can’t know” if the effect would be temporary.
Trump’s administration is preparing to announce a fresh wave of tariffs on April 2, although the exact scope is not clear. Trump has promised so-called “reciprocal” tariffs on at least some nations, although his administration has not specified which ones or at what rate, and his key economic advisers have competing views on the best way to approach tariffs.
Separately, the Swiss National Bank yesterday cut its interest rate to the lowest since September 2022, at 0.25 percent, acting to stoke inflation by deterring investors from pushing money into the Swiss franc.
“Uncertainty about global economic and inflation developments has increased significantly,” Swiss National Bank President Martin Schlegel said in Zurich. “As a result, the outlook for inflation in Switzerland, too, is currently very uncertain. At present, the risks are predominantly to the downside.”
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