Federal Reserve Chairman Jerome Powell will speak at a press conference in Washington, DC, USA on June 18, 2025.
Yasin Ozturk |Anadoru | Getty Images
Federal Reserve Chair Jerome Powell will head to Capitol Hill this week to start pushing for low interest rates in the face of rising pressure from both central banks.
Powell’s six-month testimony to Congress begins Tuesday morning as central bank leaders present their monetary policy report to the Fed’s Financial Services Committee. He then heads to the Senate Banking Committee on Wednesday.
Generally, a required session in Congress allows the Fed chair to remove basic comments on the state of economic and monetary policy. The legislator then has the opportunity to ask questions. You will have the opportunity to ask questions.
However, the background of this appearance is different. Not only President Donald Trump, but several White House officials have begun to raise the heat in Powell and lower interest rates. And now he’s faced with two major Fed officials who recently spoke out in July to say he’s backing the cuts soon.
That combination of factors could lead to Wall Street becoming bustling, and the normally-politicless Federal Open Market Committee is looking at some of the protective cover.
Allianz’s chief economic advisor Mohamed El Elian said Monday on CNBC.
El Elian’s comments came shortly after Fed Gov. Michelle Bowman gave a speech in Prague that as long as inflation data lined up, we can see a lawsuit to begin easing policy next month.
Coupled with similar Friday remarks about CNBC from Gov. Christopher Waller, it appears there will be at least some pushbacks to Powell’s repeated statement last week.
Additionally, Waller and Bowman are both Trump’s appointees, who are now in office after their first term, and are mentioned as potential candidates for Powell’s success next year.
“Now we have two governors who are leaning towards the Republicans who have come out of this July concept, and they have driven the market,” El Erian said. “What I know is that Jay Powell has a lot of difficulties trying to unite everyone with his message.”
In fact, according to Gauge of CME Group’s FedWatch Futures Pricing, traders increased their chances of cutting in July to around 23%, reaching 82%, lagging behind the move in September.
Even more quickly, Powell was able to be controversial two days ahead as he attempts to explain the Fed’s position in the face of some sort of hostility on either side of the aisle of Congress. Following Trump’s lead, Republicans could Quiz Powell on what hold-ups are to make monetary policy easier, but liberal Sen. Elizabeth Warren (D-Mass.) has urged Powell to cut as well.
The issue of Trump’s appeal
But Trump’s desire for dramatic cuts — he suggests the value of at least two percent points — is unlikely to happen either.
Waller said in an interview with CNBC that he wanted to “start late” with disconnection. At last week’s FOMC meeting, participants suggested that the endpoint or terminal rate for the Fed fund ratio was around 3%, just 1.25 points above the current level.
Beyond that, such a dramatic move can be counterproductive.
When the Fed cut full points from September to December last year, Treasury yields actually increased almost in parallel with the cuts as bond market investors were promoted to economic growth and the possibility of higher inflation.
“The idea that the Fed does something, there’s immediate communication and works accurately in a way that everything should work is just a myth,” said Jai Kedia, a researcher at Cato Institute, a libertarian think tank. “You know, people are overestimating the Fed’s impact, especially on the economy right away.”
Nevertheless, the administration is calling for immediate action from Powell, despite the fact that the chairman is just one of the 12 voters on the committee setting interest rates.
Bill Prute, director of the Federal Housing Finance Agency, posted on X on Monday. The momentum is “building for Powell’s immediate resignation,” and Trump added, “It’s clear that we need to look at Powell’s political bias against our great president.”
The Fed’s mission
However, Kedia said the White House’s demand for dramatic actions from the Fed is irresponsible.
For one thing, he said it’s not the Fed’s job to cut federal borrowing costs.
“The Fed’s mission is to actually stabilize inflation and stabilize jobs,” Kedia said. “We can debate whether it should have that mission or how successful it was to do it, but if we’re in charge of federal debt, we can kiss them goodbye to that obligation.”
Like El Elian, Kedia prefers the Fed’s first move in September rather than July, but believes the Fed can begin cutting rates. FOMC members split in last week’s meeting over the aisle and scope of cuts.
Kedia said Powell and the rest of the FOMC risk losing the economy and its reputation if they consider tracking the course Trump is trying to push.
“I think the rates are just a little too high right now, but if you’re basically following monetary policy rules or considering guidance from the macroeconomics, the reason for cutting rates is not to say you have to lower the rates as much as President Trump wants them to be reduced,” he said. “We can create a good economic case where the Fed should cut interest rates, but that has nothing to do with the political aspect.”
