Fed's rate cut decision highlights potential economic trouble

Today's announcement by members of the Federal Reserve including Chair Jerome Powell highlights economic trouble - a topic much deeper than the simple "wait and see."

Fed Chair Jerome Powell.

On June 18th, The Fed made its final decision to keep interest rates steady in its continued pursuit of "wait and see," in other words, do not make radical economic change to an increasingly volatile economy, just hold rates until inflation stabilizes and the job market blunders.

Investors anticipated this to happen, but many did not hope for this decision to be so absolute. Because of the prices of certain goods like oil falling significantly in the first half of 2025, some expected a small rate cut to happen. Others justified a possible rate cut with rhetoric from President Donald Trump, who demanded a single-point rate cut last week.

Trump's initial comment after the release of May's CPI report, urging a full 1-point rate cut.

In fact, Trump has threatened the Federal Reserve to shift management to fit his own ideologies. He has not ruled out appointing current Secretary of the Treasury Scott Bessent to run the Federal Reserve after vetoing Powell's renomination in May of 2026.

In regard to the Fed specifically in their perspective on the announcement, they have cited concerns over inflation and tariffs as a key reason for holding rates. Although May's CPI was an overperformance compared to economists' predictions, it was still a price increase nevertheless, even though oil went down. Many large businesses, from Walmart to Best Buy, have already committed to increasing prices and freezing new employment to grapple today's turbulent economic environment.

"We’re beginning to see some effects [of tariffs], and we do expect to see more of them over the coming months," said Fed officials in the announcement.

Now, economists are predicting two rate cuts to happen this year, with the last being in December of 2024. Less officials believe that two cuts will happen this year, while prospects in 2026-2027 for cuts are diminishing rapidly among Fed officials.

Trump, in his usually retaliatory attitude to policy changes which he disagrees with, told the press, "Maybe I should go to the Fed; I'd do a much better job."

Trump added, "I think he [Jerome Powell] hates me." Keep in mind that this decision was made by several officials, not just Powell, many of whom are staunch fiscal conservatives like Trump.