Trump says interest rates should be lowered to go ‘hand in hand’ with his tariffs​on February 12, 2025 at 4:02 pm

President Donald Trump again switched positions on the Federal Reserve, indicating in a social media post Wednesday that interest rates need to come down.

“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!! Lets Rock and Roll, America!!!” the president said in a morning post on Truth Social.

The comments come a day after Fed Chair Jerome Powell said policymakers don’t need to be “in a hurry” to lower rates as they watch progress on inflation. Other officials have said they also are evaluating the potential impacts that tariffs will have on prices, though Powell has avoided commenting directly on the issue.

In an appearance Wednesday before the House Financial Services Committee, Powell again wouldn’t respond directly to Trump’s desire for lower rates, but said “people can be confident that we’ll continue to keep our heads down, do our work, make our decisions based on what’s happening in the economy.”

Asked if “statements by elected officials are not among the things that cause you to act one way or the other,” Powell responded, “That’s correct.”

Trump’s post also reflects a shifting narrative from the White House when it comes to monetary policy.

Shortly after taking office, Trump demanded that interest rates be lowered “immediately,” though he has no direct authority over the Fed. Days later, he said the central bank made the correct decision in holding rates steady at its late January meeting.

In subsequent remarks, Treasury Secretary Scott Bessent said the administration was more focused on lowering the 10-year Treasury yield than the short-term fed funds rate.

However, the Wednesday comment from Trump indicates a reversion to putting pressure on the central bank to ease policy.

Market pricing implies the Fed will stay on hold until June or July and then not cut again for the rest of the year. Some economists, including those at Bank of America, think the central bank won’t ease at all this year after taking the benchmark overnight borrowing rate down a full percentage point in 2024.

About a half hour after Trump’s post, the Bureau of Labor Statistics reported that consumer prices rose more than expected in January. The 3% 12-month inflation rate — 3.3% when excluding food and energy — solidified market expectations that the Fed will be on hold for its March meeting and could wait until at least September before cutting again.