President Trump once again turned up the pressure on the Federal Reserve, saying Wednesday evening on social media that the central bank would “be much better off” lowering interest rates as tariffs go into effect.
The comments on Truth Social came after the Fed held interest rates steady Wednesday for the second meeting in a row and maintained a prior prediction for two rate cuts at some point this year.
What the central bank did change, however, was its outlook on inflation (higher) and economic growth (lower), with Fed Chair Jerome Powell saying that a driving reason for the change was uncertainty stemming from Trump’s plans for an aggressive slate of new tariffs on top of new duties already imposed on China, Canada, and Mexico.
The president has promised to unveil “reciprocal” tariffs on many countries on April 2, which he has taken to calling “liberation day.”
“The Fed would be MUCH better off CUTTING RATES as U.S.Tariffs start to transition (ease!) their way into the economy,” Trump said in his post on Truth Social. “Do the right thing. April 2nd is Liberation Day in America!!!”
Powell did not shy away from the impact of Trump’s tariffs during a highly anticipated press conference Wednesday.
The Fed chairman said in no uncertain terms that Trump’s trade agenda would be likely to drive up prices, even amid considerable uncertainty about exactly how much — and whether the price changes would be “transitory.”
Read more: What Trump’s tariffs mean for the economy and your wallet
In just one example Wednesday afternoon during a question about price stability, Powell said that inflation had previously neared the Fed’s key goal but now “I do think with the arrival of the tariff inflation, further progress may be delayed.”
Some analysts raised questions about the Fed’s unchanged overall prediction of two cuts this year even as Trump’s trade policy has roiled markets and cut back projections of economic growth for the remainder of the year.
“We continue to think that Fed officials are underestimating the extent to which tariffs are likely to push up inflation,” Capitol Economics said in a note immediately after Wednesday’s decision but before the press conference.
At other points in his press conference Wednesday, Powell also said that the exact effects of tariffs on prices were uncertain, may never be exactly known, and could even be temporary.
He called the price effects of tariffs potentially “transitory” — reusing a much-scrutinized word that was deployed by the Fed and other economic officials in 2021 as prices started to rise during Joe Biden’s presidency.
