Powell Hints at Imminent Rate Cuts as Trump’s Pressure on the Fed Intensifies

Federal Reserve Chair Jerome Powell has signaled that long-awaited interest rate cuts could arrive soon, marking the first such move during the current presidential term. In a pivotal speech at a major central banking forum, Powell highlighted growing concerns over a weakening job market, suggesting that lower rates might be necessary to bolster the economy after eight months of unchanged policy.
The labor market’s instability has prompted a shift in the Fed’s outlook, with Powell noting rising downside risks to employment. He described the potential for tariffs to have only a temporary impact on inflation as a reasonable assumption, while emphasizing that the current restrictive policy stance could warrant adjustments based on evolving economic risks.

This address comes against a dramatically altered landscape for the Federal Reserve, as it faces unprecedented criticism from the White House since the start of the second presidential term. The administration has escalated its efforts to influence the central bank, including signals from the Justice Department about investigating a Fed governor over allegations of mortgage fraud related to property dealings.

Amid these tensions, demands for substantial rate reductions continue, alongside active searches for a successor to Powell, whose term as chair concludes in May 2026. The administration is also working to reshape the institution through key appointments and promotions, such as elevating a vice chair to oversee banking regulations, with expectations of easing rules for major financial institutions. Potential candidates for leadership roles have expressed intentions to reduce the central bank’s staff.

A recent nomination aims to fill a vacant governor position following a resignation, which could further shift the board’s composition. If additional changes occur, including the potential removal of the investigated governor, the board might gain a majority aligned with the administration’s views. This setup includes seven governors, with the chair among them, and a four-person majority could enable significant actions, such as dismissing regional bank presidents who influence interest rate decisions. Powell has not indicated whether he intends to remain on the board beyond his chairmanship, as his separate governor term extends to 2028.

Despite these external pressures, Powell reaffirmed the Fed’s commitment to independence, stating that decisions on rates would be driven exclusively by economic data and the pursuit of maximum employment and price stability, without deviation due to political demands.