After the release of May’s Consumer Price Index (CPI) data came in short of expectations, U.S. President Donald Trump and Vice President J.D. Vance have intensified pressure on the Federal Reserve to cut interest rates.
On Wednesday, foreign news outlets, including economic news channel CNBC, reported that Vance posted on social media platform X that the May CPI figures released by the Department of Labor show that tariffs are not driving inflation. He called on Fed Chair Jerome Powell to reduce interest rates.
Vance wrote, “The president has been saying this for a while, but it’s even more clear: the refusal by the Fed to cut rates is monetary malpractice.”
The Department of Labor’s May CPI report showed a 0.1% increase from the previous month, lower than the 0.2% rise economists had predicted in a Dow Jones survey. Compared to the same period a year ago, it rose 2.4% and matched expectations.
Moreover, the core price index, which excludes volatile food and energy prices, rose by just 0.1% month-over-month, below the anticipated 0.3%. The year-over-year increase was 2.8%, falling short of the expected 2.9%. These figures indicate that U.S. inflation in May decelerated more than analysts had forecast.
In the wake of the CPI announcement, Trump joined the calls for rate cuts. He wrote on Truth Social that it’s crucial for the Fed to lower rates by a full percentage point.
On June 6, following the release of May’s employment figures, Trump demanded a rate cut, calling the Fed a disaster for delaying while Europe has cut rates nine times, despite the U.S. economy performing well.
The May jobs report revealed that the U.S. non-farm sector added 139,000 new jobs, surpassing economists’ expectations of 130,000.
The Fed’s most recent rate cut occurred in December 2024, prior to the Trump administration taking office.
The Federal Reserve has consistently expressed concerns that the Trump administration’s tariffs could fuel long-term inflation.
In contrast, the Trump administration views declining prices and signs of a partial slowdown in the job market as compelling reasons to lower interest rates.
At the press conference following last month’s Federal Open Market Committee (FOMC) meeting, Chair Jerome Powell maintained that while the labor market remains robust and inflation is low, it is necessary to monitor the situation with patience.
CME Group’s statistics indicate that traders don’t anticipate a rate cut until September at the earliest.
The Fed’s March outlook report projected at least two rate cuts this year.
Elyse Ausenbaugh, Investment Strategist at JPMorgan Asset Management, commented that while current inflation and labor market data suggest it’s time for rate cuts, the Fed is likely to emphasize the ongoing uncertainty and a desire not to act too early.
The upcoming FOMC meeting is scheduled for June 17-18, with market consensus pointing to a hold on interest rates.
