Just hours before the Federal Reserve was set to announce its latest decision on interest rates on Wednesday, President Trump unleashed a barrage of attacks on its chair, Jerome H. Powell.
“I call him every name in the book trying to get him to do something,” Mr. Trump said at an event at the White House, where he bashed Mr. Powell for not slashing interest rates.
“I’m nasty, I’m nice — nothing works,” he lamented as he called Mr. Powell a series of names, including “stupid” and “Mr. Too Late.”
The central bank’s resolve in the face of what has been an unrelenting pressure campaign from the president was on full display on Wednesday. Policymakers held interest rates steady for a fourth straight meeting, and nearly half of them signaled in new projections less scope to cut interest rates this year in anticipation of resurgent inflation. The Fed’s benchmark interest rate is currently in a range of 4.25 percent to 4.5 percent.
Mr. Powell was also unwavering in his message that the Fed could afford to take its time on interest rate cuts and would stick to a “wait-and-see” approach until officials had more clarity about how Mr. Trump’s policies were affecting the economy.
That could take months, keeping the White House and the Fed on a collision course that economists say stems directly from Mr. Trump’s policies, including his global trade war.
“They want to wait at this point because they’re caught between a rock and a hard place with tariffs,” said Jay Bryson, chief economist at Wells Fargo. “It’s a supply shock. It’s going to simultaneously raise inflation while raising the unemployment rate.”
Neither of those things have happened yet, putting the Fed in an awkward position as it stands pat in anticipation of an economic shift that has not yet materialized. Price pressures have stayed surprisingly muted and the labor market, while softer, is still on relatively solid footing.
For Mr. Trump, there appears to be no barriers for the Fed to lower interest rates, as other central banks around the world have done. On Thursday, the Swiss National Bank slashed borrowing costs to zero. But for the Fed, it is just a matter of time before inflation starts creeping back up even as growth takes a hit, making it imprudent for it to take action right now.
“The Fed has sought refuge in data dependence amid a whirlwind of shifting trade, tax, immigration and regulatory policies. But the longer it keeps the Fed funds rate unchanged, the more political pressure is likely to build,” said Gregory Daco, chief economist for the consulting firm EY-Parthenon.
The stakes could not be higher, according to Mr. Trump, who took to social media after the Fed’s decision to call Mr. Powell “a real dummy, who’s costing America $Billions!” On Thursday morning, the president continued the attacks, describing Mr. Powell as “one of the dumbest, and most destructive, people in Government.”
Mr. Trump has maintained that rate cuts are essential for the country’s future finances, since the actions of the Fed influence the amount that the government must spend to issue and service its debts through the sale of bonds.
“It’s hundreds of billions, it’s even trillions of dollars, that we’re going to lose, because of this,” Mr. Trump said before musing aloud that perhaps he could appoint himself to the Fed and secure the rate cuts he seeks. Removing Mr. Powell before his term is up is a threat he has wielded previously, despite the Supreme Court recently signaling that the president is limited in his ability to fire the Fed chair.
Interest payments on the debt are a growing source of fiscal strain for the United States, a fact that could complicate Mr. Trump’s push to usher a giant package of tax cuts through Congress. Nonpartisan congressional budget analysts found this week that the bill that passed the House in late May would add more than $3 trillion to the debt within the next decade. That would send the total amount of debt held by the public to about 124 percent of the nation’s total economic output, far more than many economists believe to be sustainable.
“You pile this much more debt onto the books, and the consequence of that is going to be forcing higher interest rates ,” said Brett Loper, the executive vice president of policy at the Peter G. Peterson Foundation, a group that supports deficit reduction.
Mr. Loper said the White House faced a “fiscal policy problem, and it necessitates a fiscal policy solution,” not a change in monetary policy at the Fed, which would not address the underlying imbalance in the federal budget.
The Fed operates independently of the White House and sets interest rates in pursuit of attaining both 2 percent inflation and a healthy labor market. It makes those decisions based on the economic data, which can be directly affected by the economic agenda that the president pursues. Mr. Trump’s tariffs, his immigration crackdown and Republicans’ broader plans to slash taxes and spending — among other changes — have radically reshaped the outlook for inflation, the labor market and growth overall. In turn, these policies have altered both the timing and the magnitude of the Fed’s interest rate cuts this year and beyond.
For a period of time, many economists held out hope that the Fed would be able to restart interest rate cuts this summer after pressing pause at the start of the year following a series of reductions in 2024. But that outcome now appears far-fetched in light of the stagflationary shock that most officials are expecting to take shape.
“If you did not have this fear around tariffs, the Fed could have easily cut rates,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.
A stagflationary shock is a tricky one for the Fed to navigate because it risks pitting its two goals against one another. At Wednesday’s news conference, Mr. Powell alluded to the enormity of the challenge for the Fed as it tries to plot out what to do about borrowing costs against this backdrop. When asked about the sharp divisions apparent among officials in their projections about interest rates, the chair noted that uncertainty was “unusually elevated” and that “no one holds these rate paths with a lot of conviction.”
Nine of the 19 Fed policymakers penciled in fewer cuts this year than the median estimate for half a percentage point reduction in interest rates this year. Seven officials forecast no more cuts over that same time period, while two predicted just one quarter-point move.
Not a single policymaker projected a reduction in borrowing costs along the lines of what Mr. Trump has called for.
Reducing interest rates that quickly could stoke inflation, the very problem the Fed is seeking to contain. But Mr. Trump, who on Wednesday said a 2.5 percentage point reduction in borrowing costs would be “nice,” has swatted away the possibility. He instead has argued that the Fed could just as easily reverse course if price pressures reared up. That approach has left even some conservative economists wary, however.
“When you lower rates, one of the things you’re doing is pushing more money into the economy, which is why Trump likes that idea,” said Stephen Moore, a former adviser to the president once nominated for the Federal Reserve. But Mr. Moore said the risks of inflation from a steep rate cut are “real,” adding: “The one thing that could really undermine the Trump presidency would be more inflation.”
What is most likely to compel the Fed to restart interest rate cuts again is if the labor market starts to meaningfully weaken. That could take the form of substantially lower monthly jobs growth, higher layoffs and a spiking unemployment rate. But until that happens, economists expect the Fed’s wait-and-see approach to endure.
“The holding pattern is appropriate,” said Ellen Zentner, the chief economic strategist at Morgan Stanley Wealth Management. The Fed was unlikely to reach a consensus on when to make a move until there was a “forcing issue,” she warned, meaning “the data deteriorating in a way that really slaps them across the face.”
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
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