President Donald Trump has reacted to the Federal Reserve’s decision to hold interest rates steady, calling Fed Chair Jerome Powell a “moron” for refusing to deliver ultralow rates.
“Jerome ‘Too Late’ Powell again refused to cut interest rates, even though he has absolutely no reason to keep them so high,” Trump wrote on his Truth Social social media platform. “We should have a substantially lower rate now that even this moron admits inflation is no longer a problem or threat.”
Powell does not set interest rates alone, but joined the 10-2 majority on the Federal Open Market Committee on Wednesday to vote in favor of leaving the Fed’s benchmark rate unchanged in its current range of 3.5% to 3.75%.
The committee’s statement, echoed by Powell in a press conference, noted that “inflation remains somewhat elevated,” with recent readings continuing to run above the Fed’s 2% inflation target.
Trump, who is preparing to announce his nominee to replace Powell as Fed chair, has called for the central bank to slash its interest rate to 1%, saying it would reduce government borrowing costs and boost the housing market.
Because inflation is currently around 2.7%, the president is effectively demanding negative interest rates, a policy that tends to penalize conservative savers while benefiting leveraged borrowers and asset holders.
In his lengthy Truth Social post, Trump argued that increased government revenue from his new tariffs justified a substantial reduction to the Fed’s policy interest rate.
“Because of the vast amounts of money flowing into our Country because of Tariffs, we should be paying the LOWEST INTEREST RATE OF ANY COUNTRY IN THE WORLD,” wrote Trump.
In reality, tariff revenue has little relationship to the Fed’s interest rate policy. The central bank uses higher interest rates to curb inflation, and lower rates to stimulate the job market, in line with its dual mandate of price stability and maximum employment.
If anything, higher tariffs, which are a tax on imports, tend to raise consumer prices, which should lead the Fed to raise interest rates rather than lower them, says Realtor.com® Senior Economist Joel Berner.
“Trump appears to be talking about managing fiscal policy, where tariffs act as government revenue to pay government expenses,” says Berner. “The Fed is concerned with monetary policy, which is managing the amount of and ease of access to money in the economy.”
Berner notes that increased tariff revenue could help reduce the government’s debt financing through bond issuance by the Treasury, which might naturally relieve upward pressure on long-term rates.
“A lower supply of government bonds for sale means higher prices and lower yields, which would help interest rates fall, but this is a market mechanism and not anything to do with the Fed’s short-term interest rates,” he says.
Trump’s pick for Fed chair expected next week
Trump is expected to announce his nominee to replace Powell as Fed chair imminently, telling reporters on Thursday that he would unveil his choice next week.
“We’re going to be announcing sometime next week I think,” Trump said at a cabinet meeting. “It’ll be a person that will I think do a good job. We’re paying far too much interest at the Fed, the Fed rate’s too high, unacceptably high.”
Powell was first appointed as Fed chair by Trump himself in 2018, and his current term will expire in May. For the past year, Trump has vented fury at Powell over interest rates, and is expected to name a new chair who shares his desire for lower interest rates.
The leading candidates for the nomination are former Fed Gov. Kevin Warsh and BlackRock’s top bond trader Rick Rieder. Although Rieder is the leading candidate in prediction markets, a recent CNBC poll of expert forecasters found 50% expect Trump to tap Warsh.
The poll also found that forecasters expect just two further rate cuts from the Fed this year, even with Trump’s new chairman set to take over in May.
Bill Adams, chief economist at Comerica Bank, also believes the Fed will make just two quarter-point cuts in 2026, arguing that “the bar is higher for the Fed to make interest rate cuts” in light of Trump’s pressure campaign.
“Policymakers will feel they are under pressure to demonstrate their continued independence from political pressure to financial markets,” Adams said Thursday in a webinar hosted by The Bond Buyer. “That means that the data to justify interest rate cuts will will probably have to be a bit more compelling than it would have needed to be, had there not been this change in the political context.”
As well, Trump’s new Fed chair is just one vote out of the 12 members of the FOMC on rate policy, and will have to forge a majority consensus to make changes to interest rates.
It remains an open question whether Powell will remain on the FOMC after his term as chair ends, potentially impacting the math of forging a consensus for easy money.
Traditionally, outgoing Fed chairs give up their seats when they relinquish the role, but Powell has the option to remain on as a governor until 2028 if he chooses.
After revealing that he is under criminal investigation by Trump’s Justice Department earlier this month, Powell is seen as much more likely to buck tradition and remain on the FOMC after May. But asked about his plans on Wednesday he declined to comment.
“I don’t want to get into this,” said Powell. “There’s a time and place for these questions, but not something I’m going to be getting into today.”
