Federal Reserve's Rate Cuts Unlikely to Fully Meet Trump’s Expectations

Following a significant pause, the Federal Reserve appears poised to resume cutting interest rates.

The timing of these reductions will largely hinge on developments in inflation and employment, both of which remain uncertain due to shifting trade policies and tariffs introduced by the administration.

Federal Reserve Chair Jerome H. Powell emphasized this uncertainty after the central bank decided to maintain steady interest rates for the fifth consecutive meeting. Notably, the decision was not unanimous, as two Board of Governors members dissented, favoring a quarter-point rate cut—the first such dual dissent since 1993.

At the post-meeting press conference in July, Powell acknowledged the possibility of a rate cut as soon as September but refrained from confirming any definitive action.

Even as the Fed moves toward lowering borrowing costs, it is improbable that rate cuts will be as aggressive as President Trump desires, particularly his call for rates to drop to 1 percent. This dynamic suggests the Federal Reserve will remain a focal point of criticism.

Sophia Drossos, an economist at Point72 hedge fund, noted that the Fed may adopt a cautious, gradual approach to easing monetary policy.

Moreover, a rate cut in September is not assured. As Powell addressed reporters following the policy announcement, market participants began lowering expectations for an immediate quarter-point reduction.