- ANALYSIS: Donald Trump is pressuring the Federal Reserve to cut interest rates following a favorable inflation report, arguing that the current base rate is too high with a modest 2.3% annual CPI increase. However, the Fed, led by Jerome Powell, remains cautious due to economic uncertainty, evolving tariff policies, and concerns about maintaining its independence from political influence.
President Donald Trump’s argument for a base rate cut is gathering pace as the latest CPI report from the Bureau of Labor Statistics came back with a comfortable reading of 2.3%—only a fraction higher than the Fed’s target.
In 2025 so far the Federal Open Market Committee (FOMC) and its chairman Jerome Powell have held off further normalization of the base rate–currently set at 4.25% to 4.5%—as the group nervously eyes whether President Trump’s tariff regime will push up prices for consumers.
The CPI report released this week will be a double-edged sword for the FOMC.
On the one hand, it’s good news that inflation is hovering so close to the target of 2%—to some extent endorsing the policy stance the committee has taken in recent months.
On the other hand, the report gives Trump ammunition to call for a cut to interest rates.
Indeed when the CPI report was shared, the president wasted no time on doubling down on his stance that the FOMC should be loosening monetary policy in the U.S.
Taking to Truth Social, the social media platform he owns, Trump wrote: “No inflation, and prices of Gasoline, Energy, Groceries, and practically everything else, are DOWN!!! THE FED must lower the RATE, like Europe and China have done.”
For context, the president’s post isn’t entirely accurate. The CPI report didn’t confirm there was no inflation—that would have been a reading of zero—and in fact reported an inflation increase of 0.2% compared to a month prior, bringing the 12-month average to 2.3%.
The president is correct in saying that the prices of gas and groceries dropped in April, down 0.1% each, though energy and energy service prices increased 0.7% and 1.5% apiece.
Many other commodities such as clothing, used cars and trucks, and food away from home posted negative inflation readings, while the likes of shelter, medical care services and transportation services increased in price fractionally.
“What is wrong with Too Late Powell?” Trump added on Truth Social. “Not fair to America, which is ready to blossom? Just let it all…
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