President signals softening tone as White House ramps pressure on monetary policy and central bank operations

July 26 — President Donald Trump expressed renewed confidence that the Federal Reserve will soon begin cutting interest rates, following what he described as a “very good meeting” with Fed Chair Jerome Powell on Thursday.

“I think he’s going to start recommending lower rates,” Trump told reporters Friday. “He said very strongly the country is doing well — I took that as a signal.”

The comments mark a significant shift in tone after years of tension between the Trump administration and the Fed over interest rate policy. Trump’s remarks come amid broader pressure from the White House, which is also calling for a review of the Fed’s operations and finances.

🏛️ Powell Holds the Line, for Now

While Trump appeared optimistic, Powell and other Fed officials have so far resisted cutting rates, citing a strong economy and a desire to monitor the inflationary effects of Trump’s own tariffs. The Fed’s current target rate remains at 4.25% to 4.5%, and markets expect it to stay unchanged in next week’s FOMC meeting.

Despite this, Trump suggested that Powell was inching closer to the White House’s long-standing call for easing, especially to support sectors like housing.

“It may be a little too late… but I believe he’s going to do the right thing,” Trump added.

💬 Budget Office, Treasury Echo Pressure

White House Budget Director Russell Vought reinforced the president’s message during a CNBC interview, saying the Fed should begin easing to stimulate economic growth. He denied that the administration was launching a “pressure campaign,” while still advocating for accountability and reform.

“This is not a pressure campaign… but the Fed doesn’t exist without oversight,” Vought said. “We will continue to raise our concerns.”

Treasury Secretary Scott Bessent has also advocated for a comprehensive review of the central bank — including its ongoing building renovation and operational budget deficit, which hit $80 billion in 2024 due to higher interest payments on bank reserves.

🏗️ Fed Renovation and Political Optics

The meeting followed a high-profile visit by Trump to the Fed’s headquarters, where he clashed with Powell over the cost of renovations. Despite the friction, both sides described the encounter as cordial. A Fed spokesperson said they were “honored to welcome the President” and thanked him for encouraging the project’s completion.

📉 Market Outlook

Futures markets continue to price in no rate cut at the upcoming Fed meeting, though traders see growing chances for a cut in September, and possibly another by year-end.

For now, Trump appears to have backed away from threats to remove Powell, stating Thursday:

“I don’t think it’s necessary. I believe he’ll do the right thing.”