President Trump, Fed Chair Powell in closer alignment amid EU deal

President Donald Trump has kept steady public pressure on Federal Reserve Chair Jerome Powell to lower interest rates, though recent gestures suggest a softening tone. Despite months of criticism, Trump now appears less likely to pursue Powell’s removal, even as calls for monetary easing continue.

In the most recent Fed meeting, Powell commented that economic uncertainy "has diminished but remains elevated." And in Trump's meeting with Powell last week, indications are that they are now in closer alignment than in in the past. Trump expressed confidence that the Federal Reserve will begin lowering interest rates following a meeting with Fed Chair Jerome Powell. Trump described the meeting as positive and interpreted Powell’s remarks about the economy’s strength as a signal that rate cuts may be forthcoming. This aligns with Trump’s long-standing push for monetary easing to support economic growth. However, expectations indicate the Fed will not reduce rates this week.

The meeting also preceded Trump's trade agreement with European Union president Ursula von der Leyen, which includes an EU investment in the US of $600 billion and an agreement to purchase $750 billion of US energy products.The agreement comes along with a 15% tariff for most goods the EU sells to the US, which she said, was "the best we could get."

Despite Trump’s optimism, Powell and other Fed officials have been cautious about cutting rates, citing the economy’s resilience and the uncertain impact of tariffs on inflation. Powell has previously argued that strong economic indicators justify maintaining current rates while monitoring evolving data. This stance has created tension between the White House and the Fed over the direction of monetary policy.

One prominent critic of Powell, Allianz' chief economic advisor Mohamed El-Erian, spoke on CNBC over the weekend to argue why Powell, even in the midst of strong markets and closer alignment with the president, should still resign.

"It's all about preserving the independence of the central bank, that is the guiding principle," El-Erian said. "We all agree on the importance of central bank independence. We all agree that we are far away from the first-best, whereby Powell completes his term and doesn't get attacked. What we disagree on is in the world of second-best - what is the least costly option for the Fed? Is it Powell staying and the attacks not just deepening but widening? ... You risk a fundamental long term damage to the independence of central bank, or alternatively, he steps down. De-escalates the situation."

White House budget director Russell Vought reinforced the administration’s call for lower rates and a broader review of the Fed’s operations. While denying a pressure campaign, Vought emphasized concerns about the Fed’s renovation project and its role in supporting sectors like housing. He also hinted at deeper scrutiny of the central bank’s structure and decision-making processes.