Key Takeaways:
- Trump told Fed Chair Warsh to cut rates in an exclusive CNBC interview
- Markets price a 68% chance of a quarter-point cut at the July 29-30 meeting
- The fed funds rate stands at 4.50%-4.75% after three cuts since September 2025
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Trump presses Fed's Warsh for rate cuts, challenging 2 cut path
President Donald Trump told Federal Reserve Chair Kevin Warsh to cut interest rates, wading directly into monetary policy as markets price two quarter-point reductions by year-end.
President Donald Trump pressed Federal Reserve Chair Kevin Warsh to lower borrowing costs, telling CNBC the central bank chief "has to do what he has to do" — a direct intervention that risks reigniting debate over Fed independence.
"He has to do what he has to do," Trump said in an exclusive Oval Office interview with CNBC's Joe Kernen on July 2, when asked about Warsh and the prospect of rate cuts.
The comments come with the fed funds rate at 4.50 percent to 4.75 percent after the Fed delivered three quarter-point cuts since September 2025. Overnight index swap markets price a 68 percent probability of a quarter-point reduction at the July 29-30 meeting, with a second cut fully priced by December, according to CME FedWatch data.
Trump's remarks add political pressure to a central bank already navigating a delicate balance between cooling inflation — which stood at 2.8 percent on the Fed's preferred PCE gauge in May — and supporting an economy where labor force participation dropped to 61.5 percent in June, its lowest since March 2021.
The president's comments echo his first term, when he repeatedly criticized then-Chair Jerome Powell for not cutting rates fast enough. The last time a sitting president publicly pressured the Fed on rate policy was in 2019, when Trump's criticism preceded a 25-basis-point cut in July of that year and two additional reductions before year-end.
Warsh, whom Trump appointed as Fed chair in February 2026 after Powell's term expired, has sought to maintain the central bank's independence while navigating the administration's economic agenda, which includes tariff policies that have raised input costs for manufacturers. The average US tariff on Chinese goods stands at 21 percent after the May 2026 escalation, up from 14 percent at the start of the year, Census Bureau data show.
The S&P 500 rose 0.6 percent on the day of the interview, while the two-year Treasury yield fell 4 basis points to 3.92 percent as traders interpreted Trump's remarks as increasing the odds of easier policy. The US dollar index slipped 0.3 percent against a basket of major currencies.
The Fed's next policy meeting is scheduled for July 29-30, where the Summary of Economic Projections — the so-called dot plot showing individual rate projections from 19 Fed officials — will be updated. In the June projection, the median official penciled in two cuts for 2026, though the range of forecasts showed a split between those favoring one reduction and those expecting three.
Trump also said he plans to remove Fed Governor Lisa Cook "by winning the case," referring to a legal challenge against her position, showing broader dissatisfaction with the central bank's composition.
This article is for informational purposes only and does not constitute investment advice.
