On Thursday, Federal Reserve Chairman Jerome Powell met with President Donald Trump at the White House to discuss the state of the nation’s economy, employment, and inflation.
In early May, the Federal Open Market Committee (FOMC) announced it was holding the federal funds rate at 4.25%-4.50%.
“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” said the FOMC in a statement. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
Earlier this week, Federal Housing Finance Agency (FHFA) Director William J. Pulte took to social media to also call for a reduction in the federal funds interest rate, calling upon Powell to take action.
“Jay Powell needs to lower interest rates—enough is enough. President Trump has crushed Biden’s inflation, and there is no reason not to lower rates. The housing market would be in much better shape if Chairman Powell does this,” said Pulte in his post on X.
“Chair Powell did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information, and what that means for the outlook,” said the Fed in a statement after the meeting.
White House Press Secretary Karoline Leavitt confirmed the Powell meeting, telling reporters that the Fed’s summary was correct, but noting that Trump pushed Powell to lower rates.
“The President did say that he believes the Fed Chair is making a mistake by not lowering interest rates, which is putting us at an economic disadvantage to China and other countries. The President’s been very vocal about that, both publicly and now I can reveal privately as well,” Leavitt said in a briefing with the press.
The President does not have direct control over the Federal Reserve’s policy decisions, but does have some influence. The President can nominate and appoint members of the Federal Reserve Board of Governors, including the Chairman, which can influence the overall direction of the Fed, and can also voice their opinions about monetary policy. The President selects one member of the Board of Governors to serve as Chair of the Board, who also serves as the FOMC Chair. The FOMC, which makes the actual monetary policy decisions, is made up of all seven governors and five of the 12 regional Federal Reserve Bank Presidents. While the chair has one vote like the other governors, the structure is designed to prevent one individual, including the president, from dictating decisions and policies.
President Trump appointed Powell as head of the Federal Reserve during his first term in 2018, with his term ending in May 2026.
“Chair Powell said that he and his colleagues on the FOMC will set monetary policy, as required by law, to support maximum employment and stable prices, and will make those decisions based solely on careful, objective, and non-political analysis,” added the Fed in a statement.
The Federal Reserve System performs five general functions to promote the effective operation of the U.S. economy:
- To promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
- Promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
- Promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
- Fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
- Promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
The Federal Reserve Board recently hosted the Second Thomas Laubach Research Conference, a key component of how the Federal Reserve reviews its monetary policy strategy, tools, and communication. As noted by Powell, the Fed will begin to analyze its framework, and the methods it uses to set interest rate policy and communicate it to the public, marking the first time the Fed will do so since 2020.
“We will reconsider aspects of our strategic framework in light of the experience of the last five years,” said Powell in his opening remarks. “We will also consider possible enhancements to the Committee’s [FOMC] policy communication tools regarding forecast uncertainty.”
The Fed’s current monetary policy framework was crafted in an environment of low inflation and interest rates bordering the zero percent range. Under these conditions, the Fed keyed in more on the risk of being unable to stimulate the job market than on how to respond to inflationary concerns.
“The structure of the economy evolves over time, and monetary policy-makers, strategies, tools, and communications need to evolve with it,” said Powell on revising the Fed’s policy framework. “The challenges presented by the Great Depression differ from those of the Great Inflation and the Great Moderation, which in turn, differ from the ones we face today. A framework should be robust to a broad range of conditions, but also needs to be updated periodically as the economy and our understanding of it evolve.”
The FOMC is set to meet June 17-18, and will determine the direction of the fed funds rate.
