Powell Reaffirms No Rush to Cut Rates as Trump Criticizes “Very Average Mentally” and Search for a “Shadow Chair”

TradingKey - On Wednesday, June 25, Eastern Time, Fed Chair Jerome Powell reiterated the Federal Reserve’s stance of not rushing to cut interest rates during his second day of defending monetary policy on Capitol Hill, drawing President Trump’s ire.

At the NATO Summit press conference on Wednesday, Trump criticized Powell for the second consecutive day, disparaging his performance and questioning his “very average intelligence.”

Powell’s Second Congressional Visit: No Rush for Rate Cuts, Options Open

As scheduled, Powell presented the semi-annual monetary policy report and testified before the House Financial Services Committee and the Senate Banking Committee on Tuesday and Wednesday, respectively. 

He reiterated the potential for rate cuts while emphasizing no urgency, preferring to observe inflation’s trajectory in the coming months. Powell noted that tariffs will bring some inflation, not yet, but they will appear in the next few months.

He highlighted the challenges the Fed faces in assessing the impact of Trump’s tariff policies due to the unprecedented scale of such tariffs in the modern era. He pointed out that there is a lack of modern experience regarding the current tariff situation, as the scale of tariffs during President Trump’s first term was only one-sixth of the present level.

Overall, Powell maintained that while high tariffs create significant uncertainty, the U.S. economy remains strong, justifying a cautious approach. However, he left the door open for rate cuts, suggesting that future trade agreements might allow the Fed to consider easing.

In Tuesday's hearing, Powell had already hinted at a potential policy shift, indicating that further summer tariff-induced price spikes could be a key turning point for monetary policy, not ruling out a July rate cut. Some analysts interpreted his Wednesday comments as a signal for rate cuts, with the July FOMC meeting potentially marking a policy shift.

According to CME FedWatch, the market has increased the likelihood of a July Fed rate cut to 24.8%, up from just 12% a week ago.

Trump's Discontent Grows: Seeks to Announce Successor Early to “Sideline” Powell

At the NATO Summit press conference on Wednesday, Trump revealed that he has narrowed down his list of successors to three or four candidates. 

Sources familiar with the matter indicate that Trump has been considering announcing Powell's successor as early as September or October, or even sooner. However, Powell’s second term doesn’t conclude until May 2026, when a new chair would take office.

Sources suggest that Trump aims to influence market expectations and monetary policy direction before Powell's term ends by appointing a “shadow chair.”

Previously, media reports have listed key candidates for Fed Chair as former Fed Board member Kevin Warsh, National Economic Council Director Kevin Hassett, current Fed Governor Christopher Waller, and Treasury Secretary Steven Mnuchin.

Trump’s ongoing attacks on Powell have already stirred market volatility. At the time of writing, the U.S. Dollar Index fell to 96.682, the lowest level since early 2022, dropping about 0.9% from the benchmark level at the start of Powell's Wednesday hearing (10 a.m. Eastern Time).

Rodrigo Catril, a strategist at National Australia Bank in Sydney, commented that the emergence of a “shadow chair” would increase pressure on Powell to cut rates, further exacerbating dollar sell-off pressures.