On May 7, 2025, the Federal Open Market Committee held the FED funds target rate at 4.25% to 4.50%, a level unchanged since December 2024. In his statement, Chairman Jerome Powell said that, while economic growth remains solid, uncertainty has risen markedly amid evolving trade policies and global supply-chain strains saying, “If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment.” Chair Jerome Powell underscored at the post-meeting press conference that the current policy stance is “in a good place” but that the Fed will “await further clarity” before altering rates.
Conversely, the Fed dramatically cut interest rates three times in the final months of Biden’s presidency, starting with a half-point reduction in September that was followed by two quarter-point reductions in November and December. The market is hoping for three more rate cuts in 2025 but that seems increasingly optimistic.
Although the FED’s current position was not unexpected, it did come under severe criticism by Trump who appointed Powell in 2018. Trump believes that, as usual, the FED is behind the curve. Former Reagan budget director David Stockman, a frequent Trump critic, surprisingly agrees with the President on this issue, saying, “Well, here he goes again, and we actually love it! Yesterday, the Donald took the gloves off on Powell. Nay, he took him to the verbal woodshed—a Washington institution with which we have some passing familiarity.”
And Stockman isn’t the only one, Andrew Zatlin, editor of Moneyball Economics, said, “President Trump clearly has a bit of a ‘love-hate’ relationship with Federal Reserve chairman Jerome Powell. After personally appointing Powell back in 2018, Trump has recently become increasingly critical of the Fed Chair. Earlier this week, the President went as far as calling Powell a “fool” who was misjudging inflation. And frankly … Trump’s right.”
The market took all this in stride with barely a blip, and reacted much more positively to Trump’s announcement of a possible trade deal with the U.K.
