Fed Meets, Powell Speaks
In the April 25 edition of Investment Insights, we highlighted the disagreement in interest rate policy direction between Fed Chairman Jay Powell and President Trump. President Trump has not been shy about his pronouncements for lower interest rates across the economy. Part of his agenda is the continued pressuring of the Fed to lower its short-term benchmark rate.Those pressures hit a peak in early April when the administration publicly flirted with the idea of removing Powell before his term expires in May 2026. Fortunately, those threats were quickly walked back, however Trump’s aggressive jawboning for lower rates remained.
Chairman Powell hasn’t had a recent opportunity to respond—until Wednesday’s post-FOMC meeting press conference. Markets hadn’t heard from Powell, or any other Fed officials, for over a week due to the Fed’s self-imposed pre-meeting blackout period.
On Wednesday, Powell addressed the issue and made the Fed’s current stance clear—despite the White House’s urging. As expected, the Fed left interest rates unchanged, maintaining a ‘wait and see’ posture. In fact, Powell used the word “wait,” or a variation of it, at least 22 times during the press conference. “The costs of waiting to see further are fairly low, we think, so that’s what we’re doing,” he said.
Powell’s patient approach sharply contrasts his European counterparts. The European Central Bank (ECB) has cut rates seven times in the last year, while the Bank of England cut its rates on Thursday by 25 bps—matching the Fed’s four cuts in the same time span. In comparison, the Fed most recently cut rates in December 2024.
Powell also issued a warning on tariffs, stating, “If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.”
Trump voiced his frustration on Thursday by telling reporters, “Everybody is cutting but him (Powell).” Despite the pressure coming from the White House, Powell has repeatedly stated that the Fed will make its own decisions on how to balance its dual mandate of price stability and full employment.
Markets had largely expected the Fed to cut rates during its next meeting in June, however those odds have now been pushed back to the July meeting, with fed funds futures pricing in three rate cuts over the course of 2025.
