Donald Trump is once again pressing the Federal Reserve to slash interest rates, this time calling for a drop below 1%. The remarks came during a televised interview on July 14, where he claimed, “I go on TV and the market goes wild…I can move it just by talking.” He followed up with a direct demand: “Rates are way too high, no reason for this.” The statement has stirred fresh debate over monetary policy, central bank independence, and the political pressure mounting on Fed Chair Jerome Powell.
The federal funds rate currently sits in the 4.25% to 4.50% range. Trump wants it cut by more than 300 basis points. That’s not a tweak. That’s a full-scale pivot. The last time rates were near 1% was during the COVID crash in 2020. Before that, it was post-9/11 and the dot-com bust. Historically, a 1% rate signals crisis, not strength. Trump’s argument is that lower rates would reduce borrowing costs and fuel growth. But the Fed’s mandate isn’t growth at any cost. It’s price stability and full employment.
Inflation is still running hot. The June core PCE index came in at 2.8%. That’s above the Fed’s 2% target. Unemployment is holding at 4.1%. GDP growth is tracking near 2.2% annualized. These aren’t recession numbers. Cutting rates now could reignite inflation and destabilize bond markets. That’s why most Fed officials, according to the July FOMC minutes, expect only modest easing later in 2025. A couple are open to a cut in July. But none are talking about a plunge to 1%.
Trump’s push comes on the heels of his “One Big Beautiful Bill Act,” which passed earlier this month. The legislation includes sweeping tax cuts, expanded deductions, and a senior bonus to offset Social Security taxes. The bill is projected to widen the deficit by $1.3 trillion over the next 18 months. Lower rates would make that debt cheaper to service. That’s the real motive behind the pressure. The Treasury is already paying over 4% on new 10-year notes. Dropping the Fed rate could shave billions off interest payments.
Perhaps it’s still premature to declare inflation a non-issue? pic.twitter.com/hTIpukUwPS
— David Sommers (@dgsommersmkts) July 14, 2025
Markets are watching. The CME FedWatch tool shows just a 5% chance of a full-point cut this year. Futures are pricing in two quarter-point cuts at most. Investors are wary. If the Fed caves to political pressure, it risks losing credibility. That could spike long-term yields and trigger capital flight. The bond market doesn’t like surprises. It likes discipline.
Trump’s influence over the Fed is limited. He can nominate a new chair when Powell’s term expires in May 2026. Until then, the central bank is expected to hold its ground. But the rhetoric matters. Every time Trump talks rates, the market listens. And sometimes, it moves.
Sources:
https://money.com/trump-fed-rate-cuts-2025-inflation-tariffs/
https://www.cnbc.com/2025/07/03/trump-big-beautiful-bill-tax-changes.html
https://www.noradarealestate.com/blog/trump-demands-interest-rate-cuts-will-the-fed-yield-in-2025/
