The post-pandemic inflation that’s been squeezing your grocery and credit-card bills for years takes center stage in Washington in just days.
That’s when the Federal Reserve Board meets to consider interest rates, a gathering that the White House has been – to put it mildly – strongly trying to influence.
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The Trump Administration wants the Fed to slash rates immediately by almost half after May inflation and job rates basically held steady despite fidgety action earlier this year. Trump and others say this is to keep the nation from sliding into a recession, or worse, stagflation.
Related: CPI inflation report resets interest rate cut bets
Many economists say the central bank can’t ignore the potential impact to inflation from zigzagging U.S. tariffs in the next three to six months. Energy and oil prices are now considerations due to the latest Middle East conflict.
Federal Reserve Board Chair Jerome Powell has been the target of President Trump’s usual brash manner towards opponents. The president has taunted the chairman with a string of nasty names and other insults.
The most recent invective: “Numbskull.’’
Trump’s ratcheting rhetoric includes allusions to installing a “shadow” Fed president until Powell leaves on or before his term expires in May 2026. Powell has been mum about his gig and the president’s efforts to squeeze him out of his term
Jerome Powell, chairman of the US Federal Reserve, is under fire for holding interest rates steady in 2025.
Interest rates at stake in Fed meeting
The Federal Reserve’s dual mandate is to set monetary policy that keeps inflation and unemployment low at the same time.
This is often at odds because high interest rates lower inflation but cut jobs. Lower interest rates decrease unemployment rates but increase inflation.
The central bank’s Federal Open Market Committee, meeting June 17-18, controls the Federal Funds Rate that banks charge each other overnight to borrow money. When that rate goes up, so do interest rates – the cost of borrowing money for us all.
This impacts Treasury bond yields, crucial to determining how much banks charge for mortgage rates.
The post-pandemic housing market is stalled again this spring because of higher mortgage rates, a crunch hurting first-time or lower-income buyers while many sellers, especially older Americans looking to downsize, are stuck in their nests.
The current Federal Funds Rate is between 4.25% and 4.50%. Trump said he wants a cut of 2.0%, up from his earlier demand of 1.0 %, after the May Jobs and CPI reports were cooler than expected. This would add $600 billion back in the pockets of Americans, the president claimed.
But not everybody’s buying it.
Related: Fed official revamps interest-rate cut forecast for rest of this year
Economists and market analysts say the Federal Reserve is being prudent because the full depth and breadth of Trump’s tariffs and trade deals’ economic impact are uncertain.
Raphael W. Bostic, president and chief executive officer of the Federal Reserve Bank of Atlanta, said in a recent conference call with reporters that he’s “very cautious about jumping to cuts at this point.”
Bank of America analysts, in a note to clients, said it was unlikely there would be additional cuts to the Federal Funds Rate in 2025 but added that 2026 looked promising.
White House Demands Immediate Interest Rate Cut
While market watchers expect the Federal Reserve to cut interest rates by 1% next year, the White House is maintaining that the cuts must come now.
Related: Bank of America unveils surprising Fed interest rate forecast for 2026
Trump said a drop in interest rates, coupled with his “One Big Beautiful Bill” being chewed over by Congress, would boost the tepid economy. The lagging housing market would get an especially big boost.
American consumers have embraced the tariffs with China, Mexico, Canada, and the trade wars, the Trump administration says.
Not so fast, say economists, who maintain that tariff-driven lags could start to drag the prices of goods and services in 30 to 90 days as manufacturers and retailers pass the costs onto their customers.
‘Shadow’ Fed head rumblings abound
Powell is one of the few government officials the president can’t fire or ‘DOGE’ from a job.
Trump compensates by slamming Powell with derogatory nicknames like “Mr. Too Late” and a “Major Loser” for the Fed’s cautious approach to a rate cut.
The president is so ticked that he’s threatened to install a “shadow president” to ride out Powell’s remaining days. By nominating a new Fed head before Powell’s term expires, the expectation is that Powell will resign.
Multiple names have bubbled up for that role, with the latest being Treasury Secretary Scott Bessent who’s actually been on the same pipe as Trump stoking for a Powell exit.
There’s no comment from the Fed on the FOMC meeting or Powell on the president. Expectations are interest rates will remain the same in June after the FOMC meets.
Central banks in China, Switzerland, the U.K., Japan and Brazil are also expected to decide on interest rates in the coming days.
Related: Fed Chair hit with savage message on interest rates
