Trump demands full-point Fed rate cut: What it means for US economy now

As geopolitical tensions in the Mideast escalate and US economic data shows signs of weakening, President Trump's call for a full-point Federal Reserve rate cut intensifies debate on monetary policy. This report unpacks the potential impact on inflation, government debt, and market stability amid global uncertainty.

Sources:
ReutersCnbc+1
Updated 13h ago
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Sources: CnnReutersCnbc
President Donald Trump has demanded a full one-point cut in Federal Reserve interest rates, arguing it would reduce the cost of servicing U.S. debt.

"FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!" Trump tweeted, praising recent economic data as "GREAT NUMBERS!"

This call comes as the Federal Reserve prepares to announce its monetary policy decision, widely expected to keep rates unchanged for the fourth consecutive time this year. Inflation has recently moderated, nearing the Fed's 2% target after peaking above 9%.

However, economic indicators show signs of weakening. U.S. retail sales fell by a larger-than-expected 0.9% in May, marking the first decline in four months. Housing starts also dropped to an annual rate of 1.265 million, below estimates.

Economists note the fading momentum in early-year economic activity. JPMorgan's Nora Szentivanyi said, "U.S. data for May reinforced signals that the early-year boost to activity has started to fade." Meanwhile, Evercore ISI strategist Stan Shipley observed, "The hard data on a weakening economy is picking up momentum."

Global markets remain cautious amid escalating Middle East tensions and rising oil prices, which add inflationary pressures. Joseph Capurso of Commonwealth Bank of Australia warned that ongoing conflicts could worsen global risks.

Oil prices fluctuated, with U.S. futures dropping nearly 2% to about $71.85 per barrel as traders monitored the Israel-Iran conflict.

The Fed's decision will be closely watched for signals on how it plans to balance inflation control with economic growth amid these mixed signals.

Sources: CnnReutersCnbc
President Trump called for a full-point Federal Reserve rate cut, citing lower interest costs on debt. This comes amid cautious global markets, rising oil prices, and weakening U.S. economic data, including a 0.9% drop in retail sales and falling housing starts, as the Fed prepares to hold rates steady.
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Key Facts
  • Ongoing conflict between Israel and Iran causes fluctuations in oil prices, with US oil futures down 1.94% to roughly $71.85 per barrel, raising global inflation concerns on top of US tariffs.CnnReuters2
  • Investors grew cautious amid fears of greater US military involvement in the Mideast conflict, leading to cautious trading in global markets ahead of the Federal Reserve's policy decision.Reuters
  • Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, highlighted market uncertainty over potential US military intervention risks in the Middle East.Reuters
  • US retail sales fell by 0.9% in May, a larger-than-expected drop signaling economic fragility ahead of Federal Reserve decisions.Reuters
  • Housing starts dropped to 1.265 million in May, below estimates of 1.35 million and long-term demographic demand but still above recession signaling levels.Cnbc
  • JPMorgan economist Nora Szentivanyi noted that May data confirmed the fading of the early-year economic activity boost.Cnbc
  • The Federal Reserve is expected to hold interest rates steady for the fourth consecutive time amid economic and geopolitical uncertainty, with inflation near the 2% target after a recent peak above 9%.Cnn1
  • President Trump called for a full-point Fed rate cut to reduce government debt interest payments, stating "FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!" amid tariff and spending bill confusion.Cnn1
Global markets traded cautiously on Wednesday as escalating Middle East hostilities and uncertainty ahead of the Federal Reserve's monetary policy decision later in the day prompted investors to hold back on fresh stock market and currency bets.
Reuters
Reuters
Trump on his social media platform praised the data as “GREAT NUMBERS!” “FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!” he wrote.
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"The hard data on a weakening economy is picking up momentum," Evercore ISI fixed income strategist Stan Shipley wrote ahead of Wednesday's data releases. "Housing starts remain well below long term demographic demand but are above recession signaling readings," Shipley said.
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Key Stats at a Glance
US oil futures price
$71.85 per barrel
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Oil futures percentage drop
1.94%
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US retail sales decline in May
0.9%
Reuters
Housing starts annual rate in May
1.265 million
Cnbc
US inflation rate peak and target
2% target after a recent peak above 9%
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