Trump calls Fed Chairman Powell an ‘idiot’ for rejecting interest rate cuts

President Donald Trump responded to the Federal Reserve’s decision to keep interest rates stable and appointed the Fed as chairman Jerome Powell an “idiot” who refuses to charge ultra-low rates.

‘Jerome ‘Too Late’ Powell refused to cut rates again, even though he has absolutely no reason to keep them that high’ Trump wrote about his Truth Social. “We should have a substantially lower rate now that even this idiot admits that inflation is no longer a problem or threat.”

In addition to setting interest rates, Powell joined the 10-2 majority on the Federal Open Market Committee Wednesday to vote in favor of keeping the Fed rate unchanged within the current range of 3.5% to 3.75%.

The committee statement, which Powell reiterated at a news conference, noted that “inflation remains somewhat elevated,” with recent numbers still above the Fed’s 2% inflation target.

Trump, who is preparing to announce his nominee to replace Powell as Fed chairman, has called on the central bank to cut its interest rate to 1%, saying it would lower the government’s borrowing costs and boost the housing market.

With inflation currently hovering around 2.7%, the president is essentially demanding negative interest rates, a policy that tends to punish conservative savers while benefiting indebted borrowers and asset holders.

In his lengthy Truth Social post, Trump argued that increased government revenue from his new rates justified a substantial cut in the Fed’s policy rate.

“Because of the massive amounts of money flowing into our country due to tariffs, we should be paying the LOWEST INTEREST RATE OF ANY COUNTRY IN THE WORLD,” Trump wrote.

In reality, rate revenues have little relationship to the Fed’s interest rate policy. The central bank uses higher interest rates to curb inflation and lower interest rates to stimulate the labor market, in line with its dual mandate of price stability and maximum employment.

Higher rates, which are a tax on imports, tend to raise consumer prices, which should lead to the Fed raising rather than lowering interest rates, says Realtor.com® Senior Economist Joel Berner.

“Trump seems to be talking about managing fiscal policy, with tariffs acting as government revenue to pay for government spending,” Berner said. “The Fed is concerned with monetary policy, which controls the quantity and ease of access to money in the economy.”

Berner notes that higher tariff revenues could help reduce government debt financing through the Treasury Department’s bond issuance, which could obviously ease upward pressure on long-term interest rates.

“A smaller supply of government bonds for sale means higher prices and lower yields, which would help yields fall, but this is a market mechanism and has nothing to do with the Fed’s short-term interest rate,” he says.

Trump’s choice for Fed chairman is expected next week

Trump is expected to soon announce his nominee to replace Powell as Fed chairman, telling reporters on Thursday that he will announce his pick next week.

“I think we’ll announce this sometime next week,” Trump said at a Cabinet meeting. “It’s going to be a person who I think will do a good job. We’re paying way too much interest at the Fed, the Fed rate is too high, unacceptably high.”

Powell was first appointed Fed chairman by Trump himself in 2018, and his current term ends in May. Over the past year, Trump has expressed anger at Powell over interest rates, and is expected to appoint a new chairman who shares his desire for lower interest rates.

The leading candidates for the nomination are the former Fed governor. Kevin Warsch and BlackRock’s largest bond trader Rik Rieder. Although Rieder is the leading candidate in the prediction markets, there is one recently CNBC poll of expert forecasters found that 50% expect Trump to tap Warsh.

The poll also found that forecasters expect only two more rate cuts from the Fed this year, even as Trump’s new chairman takes over in May.

Bill Adamschief economist at Comerica Bank, also believes the Fed will cut just two quarter points in 2026, arguing that “the bar has been raised for the Fed to cut rates” in light of Trump’s pressure campaign.

“Policymakers will feel under pressure to demonstrate their continued independence from political pressure in financial markets,” Adams said Thursday in a webinar hosted by The bond buyer. “That means the data to justify rate cuts will likely have to be a little more compelling than it would have been had this change in the political context not occurred.”

Furthermore, Trump’s new Fed chairman will have only one vote out of the FOMC’s twelve members on interest rate policy, and will have to forge a majority consensus to make changes to interest rates.

It remains an open question whether Powell will remain on the FOMC after his term as chairman, which could potentially affect the math of forging an easy-money consensus.

Traditionally, outgoing Fed chairs give up their seats when they relinquish their roles, but Powell has the option to stay on as governor until 2028 if he chooses.

After revealing that he was under criminal investigation by Trump’s Justice Department earlier this month, Powell is seen as more likely to break tradition and remain at the FOMC beyond May. But when asked about his plans on Wednesday, he declined to comment.

“I don’t want to get into this,” Powell said. “There is a time and place for these questions, but it’s not something I’m going to get into today.”