The Blubber

The Federal Reserve likely would have cut interest rates this year if not for major policy shifts by President Donald Trump, Fed Chair Jerome Powell said Tuesday.

“I do think that’s right,” Powell acknowledged during a central banking forum in Sintra, Portugal, when asked whether the Fed would have already begun lowering rates.

So far in 2025, the Fed has held off on rate cuts. Central bankers have said they’re waiting to see the economic impact of Trump’s newly imposed tariffs before making any moves, anticipating some effect on growth and inflation.

That cautious approach has frustrated Trump, who has publicly and repeatedly attacked Powell, labeling him a “numbskull” and “moron” for keeping rates elevated.

On Monday, Trump posted a handwritten note on his social media platform criticizing Powell for maintaining higher interest rates than many other countries, claiming it has “cost the USA a fortune” and continues to do so. White House press secretary Karoline Leavitt confirmed the message was formally delivered to the Fed the same day.

Trump isn’t alone in calling for rate cuts. Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller have recently indicated that the central bank could consider cutting rates as early as July. However, neither supports the aggressive cuts Trump has demanded, instead stressing that future moves hinge on how inflation reacts to the tariff environment.

Despite some internal support, a July rate cut remains unlikely. Market data suggests an 81% chance the Fed will hold rates steady at its July 29–30 meeting, and just a 19% chance of a 25-basis-point cut.

Speaking in Sintra, Powell reiterated that most Fed officials foresee cutting rates later this year, assuming inflation and labor market data evolve as expected.

“A solid majority of (Fed officials) do expect that it will become appropriate later this year to begin to reduce rates again,” Powell said.

When asked if a July rate cut would be premature, Powell said he “can’t say” and declined to rule anything out, noting he wouldn’t “take any meeting off the table or put it directly on the table.”

European Central Bank President Christine Lagarde, who shared the panel with Powell, praised his steady, nonpartisan approach to monetary policy. She said Powell “epitomizes the standard of a courageous central banker.”

When asked how she would respond to Trump’s criticism if she were in Powell’s shoes, Lagarde responded, “I think we would all do exactly the same thing as our colleague, Jay Powell, does. The same thing.” Her comment drew applause from the audience.

“We’re trying to deliver macro stability, financial stability, economic stability for the benefit of all the people,” Powell said. “To do that successfully, we must operate in a completely non-political way. We don’t take sides. We don’t get involved in matters that fall outside our mandate.”