President Donald Trump on Friday pushed for an aggressive Federal Reserve interest rate cut, urging a full percentage point reduction, but the latest Labor Department jobs report significantly reduces the likelihood of any cut at the upcoming June meeting.
Trump’s demand for a “jumbo” rate cut came amid his ongoing criticism of Fed Chair Jerome Powell, whom he repeatedly nicknamed “Too Late,” accusing Powell of acting too slowly during the inflation surge following the Covid-19 pandemic. On social media, Trump highlighted the strength of the U.S. economy, tweeting “AMERICA IS HOT,” while urging Powell to deliver “Rocket Fuel” by cutting rates sharply.
Highlights:
Trump urges Fed to cut rates by a full percentage point
Strong May jobs report shows 139,000 new nonfarm payrolls, above expectations
Unemployment steady at 4.2%, signaling resilient labor market
Fed unlikely to cut rates in June amid solid employment data
Labor Market Resilience Pushes Back Rate Cut Expectations
The May nonfarm payroll increase of 139,000 surpassed economists’ forecast of 126,000, signaling continued labor market strength despite signs of deceleration. The unemployment rate remained unchanged at 4.2%, reinforcing the view that the economy is still absorbing jobs well. This resilience challenges narratives suggesting the labor market is weakening enough to warrant easier monetary policy soon.
Wellington Management’s fixed income portfolio manager Brij Khurana noted that the earlier weak ADP employment data had sparked some speculation about a June cut, but Friday’s Labor Department report “takes away June” as a realistic option.
Investors now overwhelmingly expect the Federal Reserve to hold rates steady at the June 17-18 meeting, with some anticipating no easing until September at the earliest.
Highlights:
Jobs growth exceeded expectations, weakening case for immediate Fed cut
Investors discount chances of June rate reduction
Fed rate cuts now more likely only after September
Fed Policymakers Prioritize Inflation Over Employment Concerns
Federal Reserve officials are increasingly signaling a cautious stance toward rate cuts, focusing more on inflation risks than employment metrics. Governor Adriana Kugler emphasized the risk of inflation overshooting targets and supports keeping rates unchanged while inflation risks persist.
Similarly, Kansas City Fed President Jeff Schmid voiced concerns about inflationary pressure from tariffs, noting uncertainty around their full impact on prices and growth but underscoring the importance of maintaining Fed credibility on inflation control.
In contrast, some Fed policymakers, such as Governor Chris Waller, advocate “looking through” tariff-driven inflation effects as temporary, suggesting they could be less inclined to act aggressively. Waller highlighted anchored inflation expectations and a belief that tariff impacts on inflation would not be persistent.
Highlights:
Fed officials wary of inflation risks despite decelerating job growth
Some policymakers view tariff-driven inflation as temporary
Mixed views create uncertainty over timing of potential rate cuts
Trump Continues to Pressure Fed, Contradicts with Rate Hike Suggestion if Inflation Returns
Despite calling for dramatic rate cuts, Trump also advised Powell that if inflation were to rebound, the Fed should respond by raising rates promptly. His messaging reflects a push for rapid and decisive Fed actions regardless of direction, underscoring his impatience with current monetary policy.
Highlights:
Trump pressures Fed for rate cuts but advises rate hikes if inflation returns
Ongoing tension between Trump and Fed leadership adds complexity to policy outlook
