The FOMC meeting is scheduled to last over two days, and the pressure on the Federal Reserve chairman is expected to mount again. The White House has demanded a significant reduction in interest rates, putting pressure on US Federal Reserve chair Jay Powell, ahead of a crucial meeting of the Federal Open Market Committee (FOMC) on July 29-30.
Trump’s budget chief, Russell Vought, defended Powell’s “too late” rate cut. Trump and other key White House officials have been hammering Fed Chairman Jerome Powell for months over his wait-and-see rate attitude.
“Markets are already attuned to the tension. A rate hold is largely priced in. But investors are watching for what comes next: the tone of Powell’s message, and Trump’s reaction if the Fed refuses to deliver the cuts he’s demanding. The pressure campaign is about to intensify,” says Nigel Green, CEO, deVere Group.
Trump says the rates can be cut by as much as 300bps from the current range of 4.25%-4.5%, while Powell is adamant to wait till the tariff impact on inflation is evident in the US CPI and other inflation data.
The market expects interest rates to remain steady, and Powell will announce the FOMC’s decision on July 30.
The talk around the firing of Powell has also been the talk of the town, but that seems to have faded now.
Trump and Powell
Last week, Trump visited the central bank’s headquarters for anything other than a formal ceremony. However, he seems to have given up on the possibility of removing Powell before his term ends, stating that firing him would be “a big move” and unnecessary.
Trump is still advocating for lower interest rates and expressed confidence in Powell’s commitment to ‘doing the right thing‘.
Trump has changed his stance quite frequently. A few weeks back, Trump showed House Republicans a draft of a letter about firing Powell, but later denied any plans to dismiss him.
The President’s first chance to revert to attack mode will occur on Wednesday, following the Fed’s policy meeting. Powell’s press conference will be an equally important event for the day.
Inflation remains above the Fed’s two-percent target, and Trump tariffs are causing price increases in some sectors of the economy.
The outcome of Trump’s upcoming public offensive could significantly alter sentiment. “The dollar could strengthen on Fed firmness, while equities and emerging markets wobble on fears of a widening institutional rift. Markets can handle steady rates. What they don’t handle well is institutional volatility. A public fight between the President and the Fed injects uncertainty into every asset class,” adds Green.
Trump administration is also considering installing a more flexible replacement after Powell’s term ends in May 2026. However, the Fed chair’s interest rates are determined by a twelve-member policy committee by majority vote.
In May, Trump and Powell had a face-off for the first time. “The president did say that he believes the Fed chair is making a mistake by not lowering interest rates, which is putting us at an economic disadvantage to China and other countries and the president’s been very vocal about that, both publicly and now I can reveal privately as well,” said White House press secretary Karoline Leavitt, when asked about the meeting at her daily briefing.
Powell’s Stand
The US Fed’s Chair Powell has stated that the policy’s direction will be determined by incoming economic information and outlook. He and his colleagues will set monetary policy to support maximum employment and stable prices, based on objective, non-political analysis, as required by law.