(Yahoo! Finance) - President Trump for the second time in five days called for lower rates from the Federal Reserve, turning up the pressure on the central bank.
"I'd like to see the Fed lower interest rates," he said Monday during a Cabinet meeting, where he stressed that grocery and energy prices are coming down.
"That's just my opinion, because things are coming down. We have inflation under control. Tremendous amounts of money will be soon coming in from tariffs."
Treasury Secretary Scott Bessent at the same cabinet meeting Monday also promised inflation would be contained, stressing that the administration is reducing "excess employment in the government sector ... so everyone laid off from the government will have an opportunity to go into the private sector."
That, Bessent added, "is going to lead to disinflation" and get inflation "under control."
The new comments from Trump about the Fed follow a statement he made last Wednesday on his Truth Social platform, where he said the central bank would "be much better off" lowering interest rates as tariffs go into effect.
"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 March 19 post on Truth Social. "Do the right thing. April 2nd is Liberation Day in America!!!"
Trump's new suggestions for the Fed come after the central bank held interest rates steady on 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."
Powell did not shy away from the impact of Trump's tariffs during a press conference last Wednesday.
The Fed chairman said in no uncertain terms that Trump's trade agenda would be likely to drive up prices but 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.
Because Fed officials expected pandemic-era inflation to be transitory, they argued there was no reason to raise rates aggressively — an expectation that turned out to be misguided as inflation rose to a four-decade high in 2022. The Fed eventually mounted the most aggressive campaign to bring inflation down since the 1970s.
Last Wednesday, Powell called the transitory tariff effect on prices "kind of the base case but we really can't know that" as he maintained the Fed's long-held wait-and-see approach to actually responding to Trump's still-unfolding economic agenda.
Powell does have a Trump administration ally in the transitory base-case view: Bessent. In a speech earlier this month, the US Treasury secretary urged the Fed to look at any tariff-related price hikes that way — while also digging the Fed for its handling of inflation during the pandemic.
"I would hope that the failed 'team transitory' could get back together and think that nothing is more transitory than tariffs," Bessent said at the Economic Club of New York on March 6.
Trump's recent comments on Fed rates follow a period when he has softened his criticisms of the Fed's monetary policy decisions and even made it clear he doesn't intend to fire Powell, someone he criticized repeatedly during his first term.
Bessent and other Trump aides have repeatedly said that the president is not focused on the Fed and is instead trying to bring down 10-year Treasury yields.
"Notice that he has stopped calling for the Fed to cut rates," Bessent said during his speech earlier this month, referring to the president.
But it's clear the White House does want a closer relationship with the central bank — and other independent agencies — after issuing a new executive order last week that gives Trump's appointees more power over such agencies.
The new order makes clear that monetary policy — the direction of interest rates — will remain under the Fed's full control but that the Fed's oversight of the country's biggest banks will now have a closer connection to the policies and priorities of the White House.
Powell was asked at his press conference Wednesday if Trump's recent firings of board members at the FTC, another independent agency, loomed as a threat to the Fed's independence as well.
"I did answer that question," he said, referring to comments made last November that any removal of Powell is "not permitted by law."
"I have no desire to change that answer and have nothing new on that for you today."
By Jennifer Schonberger - Senior Reporter
