Trump Urges Fed Rate Cuts Amid Inflation Fears
President Trump has publicly urged Fed Chair Jerome Powell to cut interest rates immediately to bolster the economy, but February's CPI report showed inflation rising 0.3% month-on-month and 2.4% year-on-year, matching forecasts. Goldman Sachs updated its forecasts amid geopolitical tensions, raising US inflation expectations while lowering the 2026 growth outlook due to the Iran War—leading markets to brace for the possibility of higher rates for longer.
Powell has privately consulted with advisors after the Justice Department opened a criminal probe into his congressional testimony regarding the Fed's renovations. Powell called the probe "unprecedented," viewing it as another move in President Trump's pressure campaign for rate cuts. Following the probe's opening, Powell made 13 calls to lawmakers. The Iran War's impact on oil prices is a key factor. Some experts believe that if the war lasts less than six weeks, the increase to inflation should be temporary. However, prolonged conflict could lead to higher oil prices, hotter inflation and greater market uncertainty. Goldman Sachs has already adjusted its forecasts, moving the expected timing of the Fed's rate cuts from June to September, with 0.25 percentage point cuts expected in September and December. They also raised their fourth-quarter forecasts for Brent crude and WTI prices. A weaker labor market, slower GDP growth, and heightened geopolitical risks could prompt earlier cuts.
