Trump is pressuring Powell to cut rates as the Fed holds the line on inflation
Trump is increasing pressure on Powell to cut rates to 1% with the Fed holding at 3.50%-3.75%, raising inflation forecasts, and warning of an Iranian oil shock at the risk of volatility.
Summary
- Trump renews Powell’s attack, demanding immediate cuts and 1% rates despite Brent above $110 and inflation expectations rising with the shock of the Iran war.
- The Fed is leaving rates at 3.50%-3.75% and predicts one cut for 2026, with officials warning that oil-driven inflation could keep PCE close to 3% and delay any easing.
- Economists say the US is now facing a recession stagflation a trap, as Trump’s appeasement cuts risk inflation while holding tight deepens the destruction of demand.
US President Donald Trump renewed his public pressure campaign on Federal Reserve Chairman Jerome Powell on Thursday, saying that Powell should lower interest rates – a demand that directly contradicts the Fed’s position 24 hours earlier, when the central bank kept rates unchanged and signaled that it expects only one reduction throughout the year 2026.
Trump’s statement, reported by Jinshi on Thursday, follows a pattern of increasing attacks on the Fed chair that has intensified since the Iran war began on February 28. As recently as March 12, Trump took to Truth Social to write: “Where is the Chairman of the Federal Reserve, Jerome ‘Too Late’ Powell, today? He should lower the Interest Rate, not the next meeting, IMMED! It is reported that the president asked for the rates to drop to at 1%, as rising oil prices significantly increase inflation expectations.
Crypto markets have been trading the show in real time: Bitcoin has already slipped back below $70,000 after briefly marking the $73,000s last week, while Ethereum has faded to the low $2,200s as the Fed backs the price of futures with one reduction in 2026 and the market starts to grow. That leaves BTC stuck between two narratives – a bullish hedge if Powell gives a hoot to Trump and lets real yields fall, or another high-beta risk asset if the Fed steps in and rates are high-long enough to collide with an oil shock to break liquidity across TradFi and crypto.
The Fed voted to keep its benchmark rate at 3.50%–3.75% at its March 18 meeting, citing continued uncertainty over both the economic impact of the Iran conflict and the residual effects of the Trump administration’s 15% global tariff. Powell acknowledged that a rate hike remains unlikely but did not rule it out, noting that the Fed would “need to assess how bearable the situation is” in reference to the global energy crisis.
The Fed’s updated forecasts are expected to revise inflation projections higher, as many economists expect the central bank to now forecast inflation to reach 3% by late 2026 – a level that is difficult to reconcile with deflation. Trump’s nomination of Kevin Warsh to replace Powell when his term ends in May was expected to usher in a tense period, but the Iran conflict could delay or complicate that transition.
The tension is high. Trump wants lower rates to stimulate the slowing economy and support financial markets hit by oil-driven uncertainty. But the Fed is facing a classic deflationary problem: cutting rates risks oil-fueled inflation, while holding or riding risks that exacerbate the destruction of demand that is underway as energy costs weigh on consumers and businesses.
CME FedWatch data shows markets are giving more than a 99% chance of no change in the current meeting, and Wall Street economists are increasingly calling for the year to be zero. Oxford Economics US chief economist Lydia Boussour noted that “given our higher inflation forecasts and the core PCE, we adjusted our baseline to show only one point cut at 25 in 2026 – but it seems that the Fed will not implement any rate cuts this year.”
The oil shock has already removed the inflation buffer provided by lower energy prices as early as 2026 in light of Trump’s tariffs. With Brent crude above $110 and Iranian strikes on Gulf energy infrastructure extended on Thursday, the Fed’s spending limit is shrinking – as Trump’s demands intensify.
