Trump says Fed's Powell is ready to start slashing interest rates

President Trump stated his belief that Fed Chair Jerome Powell is ready to cut interest rates following their meeting, despite the Federal Reserve declining to comment on Trump's optimism and Powell's prior emphasis on data dependency due to tariff concerns. This assertion, made after months of Trump criticizing Powell, comes as CME FedWatch indicates a 62.3% probability of a rate cut after the Fed's September meeting, highlighting continued political pressure on the central bank's monetary policy decisions.

Analysis

A significant divergence exists between President Trump's public interpretation of his meeting with Fed Chair Jerome Powell and the central bank's official non-committal stance. Trump's assertion that Powell is "ready to start slashing interest rates" contrasts sharply with the Fed's refusal to comment on this optimism and Powell's previously stated view that the Fed should await more data before adjusting rates, citing concerns over the inflationary impact of tariffs. This event represents a continuation of a sustained political pressure campaign on the Federal Reserve, underscored by Trump's prior criticisms and White House calls for a review of the central bank. While Trump's comments aim to guide market expectations towards a more dovish policy, current market pricing, reflected by a 62.3% probability of a rate cut after the September meeting according to CME FedWatch, suggests investors are aligning more with Powell's cautious, data-dependent approach rather than an imminent cut at the next meeting. The ongoing dispute over the Fed's $2.5 billion renovation budget further highlights the contentious relationship between the administration and the independent central bank.

Key Decisions for Investors

• Investors should prioritize incoming economic data, particularly on inflation and employment, over political rhetoric, as Fed Chair Powell has explicitly signaled a data-dependent policy path.
• Expect heightened volatility around FOMC announcements, as the divergence between White House pressure for immediate, deep cuts and the Fed's more measured stance could lead to market repricing.
• Consider the long-term risk premium associated with perceived threats to Federal Reserve independence, as sustained political pressure could impact the credibility of future monetary policy and influence US asset valuations.