Trump Warns of Economic Slowdown Unless Fed Cuts Rates, Triggering Selloff

• The U.S. economy could slow unless interest rates are lowered immediately, President Donald Trump highlighted, repeating his criticism of Federal Reserve Chair Jerome Powell, who says rates should not be lowered until it is clearer that Trump's tariff plans won't lead to a persistent surge in inflation.
• The comments, and the administration's seemingly intensifying pressure on a Fed chair Trump has stated he would like to see gone, sent stock markets lower and bond yields higher as investors and analysts mulled the fallout should Trump ignite a fight over the Fed's monetary policy independence and try to remove Powell before the end of his term a little over a year from now.
• Trump's repeated threats to fire Powell come as he tries to goad the Fed into quickly cutting interest rates to mitigate a widely expected economic slowdown and possible harm to the labor market due to his tariff and other policies, while Fed policymakers urge caution on concerns inflation, which remains above their 2% target, could be pushed higher by the import taxes. The Fed next meets on May 6-7 and is widely expected to hold the benchmark interest rate steady in the current 4.25% to 4.50% range
• The growth outlook and overall sentiment have both been falling as Trump ratcheted up efforts to impose import taxes on goods from major U.S. trading partners and many core products, with top economists raising the estimated odds of a recession this year. While inflation is expected to decline in upcoming readings, there is broad agreement as well that the import tariffs Trump plans to impose will drive it back to perhaps 4% or higher through the rest of the year.
• Fed officials say that while that price shock may prove temporary, allowing them to cut rates eventually, they worry it could lead to more persistent inflation that would require them to keep credit conditions tighter.

(Source: Reuters)