Fed's Jerome Powell Isn't Budging On Rate Cut Despite Trump's Bashing And Pressure — Here's Why - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), SPDR S&P 500 (ARCA:SPY)

Despite President Donald Trump‘s persistent criticism, Federal Reserve Chairman Jerome Powell is not rushing to cut interest rates.

What Happened: Trump has been outspoken on social media, referring to Powell as “Mr Too Late” and “a major loser” for what he sees as a reluctance to ease policy. However, the Fed Chair doesn’t seem to be in a hurry to cut rates despite the President’s bashing primarily due to three reasons.

Firstly, the president’s demands stand in sharp contrast to the Fed’s “data-driven” approach. Powell and other Fed officials believe that the current inflation rate — above their preferred 2% target — along with a strong job market, does not justify a rate cut. They emphasized the need to be “patient” before making that decision. San Francisco Fed President Mary Daly echoed Powell’s sentiments, noting that the risks to inflation are “higher than they were a year ago,” potentially requiring policy to remain tighter for a longer period, reported Reuters.

Secondly, the Fed is an independent body. Powell recently emphasized that the Fed’s independence is safeguarded by law, citing a 1930s court decision and Congress’s constitutional power to “coin money,” a responsibility that has been delegated to the Fed. “Our independence is a matter of law,” stated the Fed Chair at the Economic Club of Chicago.

Thirdly, the Federal Reserve Act of 1913 states that Fed Board members can only be removed for “cause,” which is generally understood to mean misconduct, not policy disagreements, according to Reuters.

Why It Matters: Trump’s pressure on the Fed has been a recurring theme. Although on Tuesday, he told reporters that he had “no intention” of firing Powell, despite his criticisms, Trump continues his calls for a rate cut. His comments have sparked concerns among market watchers. Sen. Elizabeth Warren (D-Mass.) warned that if Trump illegally fires Powell, it could “crash our markets.”

Moreover, CNBC commentator Jim Cramer opined that investors “would actually buy this rally” if Trump did not criticize Powell for "being prudent about rates." The ongoing tension between the President and the Fed Chair continues to influence market sentiment and the future of monetary policy remains uncertain.

SPDR S&P 500 ETF SPY declined 6.5% over the past month, while Invesco QQQ Trust QQQ slumped over 9% during the same period.