Trump Criticizes Fed Chair Powell for Delayed Interest Rate Cuts Amid Economic Uncertainty

President Donald Trump criticized Federal Reserve Chair Jerome Powell, calling him "Too Late" for not cutting interest rates amid economic uncertainty. Trump argues inflation is under control and rates should be lowered to boost growth, especially with new tariffs potentially impacting the economy. Powell defends the Fed's decision to maintain rates, citing risks of inflation and unemployment. This criticism follows a historical pattern of political pressure on the Fed. The tariffs add complexity to the Fed's decisions, with concerns about their impact on prices and growth.

Trump’s Renewed Criticism of Powell

In a post on Truth Social following the Federal Reserve’s latest decision to hold interest rates steady, President Trump lashed out at Powell, calling him a “FOOL” and asserting that he “doesn’t have a clue.” Trump added that Powell earned the nickname “Too Late” for his perceived sluggishness in adjusting monetary policy. “There is virtually NO INFLATION,” Trump claimed, arguing that the Fed should be cutting rates to stimulate the economy.

Trump’s criticism is rooted in his belief that the inflationary pressures that prompted the Fed’s aggressive rate hikes in 2022 and 2023 have now subsided. He contends that with inflation under control, the central bank should pivot toward easing monetary policy to support growth, especially in light of his administration’s new tariffs, which some fear could dampen economic activity.

Powell’s Cautious Approach

Jerome Powell, who has led the Federal Reserve since 2018, has defended the central bank’s decision to keep rates unchanged, emphasizing the need for greater clarity on the economic outlook. Speaking at a press conference following the Fed’s May meeting, Powell said the risks of both higher inflation and rising unemployment have increased, and that the Fed would wait for more definitive data before making its next move.

“There’s no real cost to waiting,” Powell said, a remark that drew criticism from some economists and political figures alike. Powell also noted that the labor market remains strong and the economy continues to grow at a “solid pace,” despite concerns about the impact of tariffs and global trade tensions.

A Familiar Pattern of Fed Criticism

Trump’s attacks on Powell are not without historical precedent. Central bank leaders have long been accused of being too slow to respond to economic changes. In the 1970s, Fed Chair Arthur Burns was criticized for keeping rates too low during a period of stagflation. Alan Greenspan faced scrutiny for not acting quickly enough during the dot-com bubble, and Ben Bernanke was faulted for underestimating the risks of the subprime mortgage crisis before the 2008 financial meltdown.

“Historically, go back and look at any Federal Reserve, and I’m going back into the ’70s, the Fed is always late both ways,” said Dan North, senior economist at Allianz Trade North America. “They tend to wait. They want to make sure they won’t make a mistake, and by the time they do that, usually it is too late.”

Powell himself has a history of delayed action. In 2021, the Fed initially labeled rising inflation as “transitory,” a misjudgment that led to a series of aggressive rate hikes once inflation proved more persistent than expected.

Tariffs Add to the Fed’s Dilemma

The economic uncertainty surrounding Trump’s new tariffs has further complicated the Fed’s decision-making. While the tariffs are intended to protect American industries, they also risk raising prices and slowing growth. Fed officials, including Vice Chair Michael Barr and New York Fed President John Williams, have warned that the tariffs could lead to higher inflation and elevated unemployment.

Tom Barkin, president of the Richmond Fed, described the current business climate as “foggy,” noting that companies are cutting discretionary spending and implementing hiring freezes, though not yet engaging in mass layoffs. “It’s really hard to drive when it’s foggy,” Barkin said, underscoring the Fed’s cautious stance.

Economists suggest that the most likely reason for a future rate cut would be to counteract a sharp economic slowdown triggered by the tariffs. With about half of U.S. imports consisting of parts used by domestic companies, higher duties could lead to increased costs, layoffs, and a potential recession.

Political Pressure and Institutional Independence

Despite his criticism, Trump has not called for Powell’s removal, though he has previously explored the limits of presidential authority over independent agencies. The White House has reportedly increased pressure on the Fed to lower rates, a move that raises questions about the central bank’s operational independence.

Kevin Warsh, a former Fed governor and a leading candidate to succeed Powell, has also criticized the central bank’s recent performance. Warsh argued that if the Fed fails to prevent tariff-induced price increases from becoming entrenched inflation, it would reflect poorly on its credibility. He also warned that the Fed’s large balance sheet has enabled excessive government spending, putting the nation’s finances on a “dangerous track.”

Still, Warsh emphasized the importance of the Fed’s independence, stating that while the central bank should be free from political interference, it must also be held accountable when its policies fall short.

A No-Win Situation for Powell?

Powell’s current predicament reflects the dual mandate of the Federal Reserve: to maintain stable prices and maximize employment. With conflicting signals from inflation data, labor market trends, and trade policy, the Fed faces a difficult balancing act.

Joseph LaVorgna, chief economist at SMBC Nikko Securities and a former Trump advisor, believes the Fed is not being forward-looking enough. “If they’re waiting for the labor market to confirm whether they should cut rates, by definition they’re too late,” he said. “We’re not going to know if it’s too late until it’s too late.”

As Powell navigates these challenges, the label “Too Late” may continue to haunt him — not just as a political jab, but as a reflection of the institutional caution that has defined the Federal Reserve for decades.

References

• Federal Reserve official sees signs of slowing economy but not ready to cut rates
• More Fed officials warn Trump tariffs could produce higher inflation and slower growth
• Powell may have a hard time avoiding Trump's 'Too Late' label even as Fed chief does the right thing
• "Shadow Fed Chairman" Waller criticized the Federal Reserve for "shifting blame" regarding tariffs: this indicates that the credibility of controlling inflation has been damaged.