President Donald Trump escalated pressure on the Federal Reserve this week after new economic data showed the U.S. added 130,000 jobs in January and annual inflation cooled to 2.5%, intensifying a public clash with Fed Chair Jerome Powell over interest-rate policy.
Trump, responding to the stronger-than-expected labor report and moderating inflation figures, argued that the central bank should move swiftly to cut borrowing costs. "The numbers were surprising - except to me, they weren't surprising," Trump said, asserting that his administration has "brought costs way down."
On Truth Social, he sharpened the message, contending that the United States "should be paying MUCH LESS on its Borrowings (BONDS!)" because it is "again the strongest Country in the World" and therefore deserves "the LOWEST INTEREST RATE, by far."
The remarks place renewed political scrutiny on the Federal Reserve, which voted 10-2 at its January meeting to hold its benchmark rate in a range of 3.5% to 3.75%. Powell told reporters it was "appropriate" to leave rates unchanged for now, citing a labor market that appears to be "stabilizing" and inflation that remains "somewhat elevated" above the Fed's 2% target.
The divergence reflects two competing interpretations of the same data.
- January job growth: 130,000 new positions
- Annual CPI inflation: 2.5%
- Current Fed benchmark rate: 3.5%-3.75%
- Fed vote margin in January: 10-2 to hold
Inside the White House, officials have framed the latest reports as evidence that further rate cuts are "long-overdue." Administration allies argue that easing monetary policy would accelerate growth and reinforce economic momentum ahead of a politically sensitive year.
The Fed's leadership, however, has emphasized caution. In 2025, policymakers delivered three rate cuts as job growth weakened and inflation hovered near 2.6% in late 2024. Powell characterized those moves as calibrated adjustments designed to support employment without reigniting price pressures.
The relationship between the White House and the central bank has grown increasingly strained. Two weeks after the Fed's third rate cut in 2025, the Justice Department opened a criminal investigation into renovation spending at Fed headquarters. Economists and Powell himself interpreted the timing as unusual, though administration officials have rejected suggestions of political motivation.
Market participants appear to side with the Fed's gradualist stance. According to CME Group's FedWatch tool, futures markets currently price in:
- A 90.2% probability that rates remain unchanged in March
- A 69.7% probability of no cut in April
- Roughly two-thirds odds of a first cut in June
The timing carries additional political implications. Powell's term as Fed chair expires in May. Trump has nominated former Fed governor Kevin Warsh to succeed him, signaling a potential shift toward a more growth-oriented approach to monetary policy.
Trump's National Economic Council director, Kevin Hassett, has criticized what he called the "old fashioned Phillips Curve story," suggesting technological gains, particularly from artificial intelligence, could allow stronger expansion without triggering inflation.
Senator Thom Tillis, a retiring Republican member of the Senate Banking Committee, has threatened to block Fed nominees until the Justice Department resolves its investigation into the central bank's renovation spending, complicating the confirmation timeline.
