As the Jerome Powell-led Federal Reserve cut rates by 25 basis points on Wednesday, US President Donald Trump signalled his displeasure, saying that a 50-basis-point cut would have been more appropriate.
Speaking to reporters after Powell's speech, Trump said that the 25 bps cut was "rather small" and asserted that it "could have been doubled, at least doubled".
The US president also said that the rates set by the Fed should “be the lowest in the world”.
Trump's comments came after Fed Chair Powell announced a quarter-point cut to bring rates to between 3.50% and 3.75%, the lowest in three years.
After announcing the cut, Powell signalled that the Fed would assess economic data before deciding whether to hold or cut rates, saying the central bank was “well positioned to wait and see how the economy evolves from here.”
Powell, however, ruled out the possibility of raising rates at the next Fed meeting.
A divided Fed
Trump's calls for lower rates also came amid a deepening rift within the Fed, with Wednesday's announcement coming from a 9-3 vote in favour of a 25 bps cut.
Of the 12 voting members—including seven members of the Federal Reserve Board of Governors, the New York Fed president and a rotation of reserve bank presidents—three dissented.
Instead of a 25 bps cut, Chicago Fed Chief Austan Goolsbee and Kansas City Fed President Jeffrey Schmid sought to keep rates unchanged, while Fed Governor Stephen Miran, a key economic advisor to Trump, backed a 50 bps cut.
The next Fed chair?
With Powell's term as Fed Chair set to end in May 2026, and a successor yet to be named, there is considerable suspense about who Trump will pick to lead the central bank.
Although several names are doing the rounds, National Economic Council Director Kevin Hassett is believed to be a front-runner, ahead of former Fed Governor Kevin Warsh and current board member Christopher Waller.
Part of why Hassett seems to be Trump's likely pick is that he is largely seen as a market-friendly voice, and Trump believes that Hassett shares his view of further lowering rates.
While Trump had earlier said he would evaluate any new Federal Chair based on whether they would move quickly to cut rates, he has yet to specify when the announcement will be made.
Although the US president said a week back that his decision would probably come earlier next year, Hassett on Wednesday suggested Trump would finalize his pick to replace Powell “in the next week or two.”
