Former President Donald Trump is once again taking aim at the Federal Reserve, renewing demands for immediate interest rate cuts while openly mocking its leadership.
This latest jab coincided with comments from Fed Governor Christopher Waller, who indicated support for cutting interest rates as early as July. Waller argued the Fed should “start slow” despite risks of inflation from Trump’s tariffs, which he described as likely to cause only a “one-off” price spike.
Internal Fed dynamics shift as Trump eyes Powell’s replacement
Waller’s remarks are notable not only for their policy implications but for their political context. Trump is actively considering who will replace Powell when his term ends in May 2026. That shortlist reportedly includes Waller himself, Kevin Warsh, and Treasury Secretary Scott Bessent. Trump has hinted he may announce his pick well ahead of schedule—creating an unprecedented “shadow Fed chair” dynamic that could influence market expectations and central bank decisions.
Trump has long criticized Powell for refusing to slash rates aggressively during his presidency and continues to link Fed policy to the government’s debt burden. However, the central bank maintains it does not consider federal borrowing costs in rate decisions, instead focusing on its dual mandate: stabilizing prices and maximizing employment.
Labor market concerns support early rate cuts
According to Waller, recent signs of strain in the job market—such as rising youth unemployment—justify immediate easing. He argues the Fed should act now to prevent deeper deterioration, especially as inflation remains relatively contained. “Why wait until we see a crash?” Waller asked, pushing for a proactive stance.
While other Fed officials maintain a cautious view, citing stable job growth and sub-4.2% unemployment rates, Waller’s urgency could signal a policy shift—especially if paired with political pressure from Trump’s camp.
A pivotal year for the Fed and financial markets
With Powell’s term nearing its end, Trump’s open criticism and the potential early nomination of a successor are injecting fresh uncertainty into U.S. monetary policy. The dynamic could weigh heavily on investor confidence, especially if Trump regains the presidency and pursues a more aggressive economic agenda.
For now, the Fed remains in wait-and-see mode, but growing internal debate and external pressure may accelerate action. Whether Powell stays or goes, the road ahead is increasingly politicized—and markets are watching closely.
