President Donald Trump escalated his criticism of Federal Reserve Chair Jerome Powell on Thursday, labeling him a “numbskull” and urging significant interest rate cuts to reduce the U.S. government’s $600 billion annual interest expense. With inflation showing signs of easing more rapidly than anticipated, Citi economists now believe the Fed could begin cutting rates as early as September.
“We still expect the Fed to deliver 125 basis points of rate cuts in successive moves starting in September,” Citi analysts wrote, citing the sharp slowdown in core inflation as the primary driver for this outlook.
Trump’s outburst followed two key inflation reports this week that revealed weaker-than-expected consumer and producer price increases. “Cutting rates by two percentage points would save the country $600 billion annually, but we can’t get this guy [Powell] to act,” Trump complained. He added, “We’re about to burn through $600 billion a year because of one numbskull who says, ‘I don’t see a reason to lower rates yet.’” While acknowledging he would support higher rates if inflation were rising, Trump emphasized, “It’s falling, and I may need to intervene.”
Citi’s analysis adds weight to growing speculation that the Fed could soon pivot to easing. May’s core Consumer Price Index (CPI) increased just 0.13% from the prior month—below both Citi’s estimate and broader market expectations.
“Moderating underlying inflation should give Fed policymakers more confidence that price increases driven by tariffs won’t lead to lasting inflationary pressures,” Citi economists noted, especially as labor market conditions gradually loosen.
While tariffs could cause some upward price movement later this summer, Citi expects minimal impact on consumer inflation due to subdued demand. “There was little indication that tariffs had any meaningful effect on May’s consumer prices,” they added, also pointing out that service sector inflation remained muted and housing-related inflation continues to decline.
Their projections show core Personal Consumption Expenditures (PCE) inflation tracking at 2.6% year-over-year in May, with additional softening expected as home prices and rental costs remain under pressure. They cautioned that upcoming inflation reports will be scrutinized for any signs of tariff-related impact, but for now, the disinflationary trend persists.
With inflation cooling and markets increasingly anticipating rate cuts by September, the monetary relief Trump has been loudly calling for may not be far off.
