Trump Was Ahead on Rate Cuts, But Powell’s Patience Proved Justified – 2025 Fed Drama Unfolds
- How Flawed Jobs Data Fueled the Fed’s 2025 Dilemma
- August’s Jobs Disaster: The Final Straw for the Fed?
- Political Firestorm: Trump and Dems Unite Against Powell
- What’s Next? The Fed’s 2025-2026 Tightrope Walk
- FAQ: Your Fed Rate Cut Questions Answered
The Fed’s 2025 rate-cut saga took a dramatic turn as revised jobs data exposed flaws in earlier reports, vindicating Trump’s calls for faster action while justifying Powell’s cautious stance. With August’s weak employment numbers (just 22K jobs added) and rising unemployment (4.3%), the Fed now faces 99% market odds for a September cut. Political pressure intensifies as critics like TRUMP (dubbing Powell "Jerome 'Too Late' Powell") and Labor Secretary Chavez-DeRemer demand immediate relief, while economists debate whether 25 or 50 bps is warranted. Here’s how the data, politics, and policy collide.
How Flawed Jobs Data Fueled the Fed’s 2025 Dilemma
This week’s revisions struck like a thunderclap: over 300,000 jobs vanished from the past four months’ reports, exposing critical inaccuracies in the Fed’s original datasets. Back in early 2025, Powell had cited seemingly robust employment growth to justify holding rates steady, even as inflation lingered below the 2% target. But the truth emerged through revisions—hundreds of thousands of jobs never existed. Trump, ever the provocateur, seized the moment on Truth Social: "Jerome ‘Too Late’ Powell waited while Americans suffered," he posted. Yet Powell’s hesitation wasn’t arbitrary; it reflected the faulty numbers he’d been given. As UBS strategist Leslie Falconio bluntly told Yahoo Finance: "A cut is inevitable now. The question isn’t ‘if,’ but ‘how much.’"
August’s Jobs Disaster: The Final Straw for the Fed?
Friday’s report was the nail in the coffin: a meager 22,000 jobs added in August (versus 75K expected), with unemployment creeping up to 4.3%. June’s numbers were revised to -13,000—yes,—while July barely limped along. "This confirms what markets already priced in: a September cut is baked," said Capital Economics’ Bradley Saunders, though he doubts we’ll see 50 bps. The real shocker? Job growth has now dipped below the "break-even rate"—the monthly jobs needed to match population growth. St. Louis Fed’s Alberto Musalem recently noted this threshold has plummeted to 30K-80K (from 100K+), reshaping how the Fed views labor health.
Political Firestorm: Trump and Dems Unite Against Powell
Rare bipartisan anger erupted as Labor Secretary Chavez-DeRemer blasted Powell’s delays: "Why he’s waiting is beyond me. If this is political chess, it’s nonsense—cut rates now!" Meanwhile, Trump’s "Too Late" nickname trended on Truth Social, amplifying pressure. Even within the Fed, cracks appeared: Governor Chris Waller pushed for a 25-bp cut back in July, arguing in August that preemptive action could "prevent deeper damage." The WHITE House’s message was clear—with businesses needing cheaper capital to hire, Powell’s patience had expired.
What’s Next? The Fed’s 2025-2026 Tightrope Walk
With a 99% probability priced in for September, EY’s Greg Daco expects a "modest" cut, but warns the bigger debate centers on 2025’s final meetings. Markets oscillate between relief and skepticism—while weak data justifies easing, some economists fear overreaction. "August’s 22K nonfarm payrolls lock in a cut, but 4.3% unemployment tempers calls for 50 bps," noted Saunders. One thing’s certain: Powell’s Jackson Hole hint about "shifting risk balances" now reads like prophecy. As the BTCC research team observed, "The Fed’s walking a knife-edge—stimulate without spooking markets."
FAQ: Your Fed Rate Cut Questions Answered
Why did Trump criticize Powell?
Trump accused Powell of delaying rate cuts despite early signs of economic softening, dubbing him "Jerome ‘Too Late’ Powell" on Truth Social.
How likely is a September rate cut?
Markets currently assign a 99% probability to a cut, per TradingView data, with most analysts expecting 25 bps.
What’s the "break-even" jobs number?
It’s dropped to 30K-80K monthly jobs needed to match population growth, down from 100K+, due to lower immigration and labor participation (Source: St. Louis Fed).
