After the Federal Reserve announced a slight reduction in the interest rate, several prominent economists observed that the nation's central bank was making noticeable moves in direct response to President Donald Trump's management of the economy.
Navy Federal chief economist Heather Long noted on Wednesday that the only dissenter against an interest rate cut was Stephen Miran, the Trump appointee who was confirmed by the Senate on a party-line vote just earlier this week. Miran's dissent was due to his wanting a rate cut of at least 50 basis points. Long analyzed each board member's vote and called it "wild" that Trump's newest appointee wanted the equivalent of "5 rate cuts by year-end."
"You can see the tension at the Fed in just 1 chart," Long tweeted. "It's likely we'll get 2 more cuts. One in October and one in December. But you can see the battles ahead."
The Fed typically cuts interest rates during an economic downturn in order to stimulate economic growth, and likewise keeps interest rates steady when the economy is more stable to prevent inflation from spiraling out of control. According to Long, the Fed's economic projection as Trump approaches the one-year mark of his second term next January is particularly dark: The Fed's board predicted that the unemployment rate would rise to roughly 4.5 percent, while inflation was projected to hit 3 percent. GDP growth was also expected to falter, cracking just 1.6 percent over the next quarter. Long referred to those projections as "stagflation-lite," which is a term economists use to describe an economy experiencing both a higher jobless rate and a higher inflation rate.
University of Michigan economics professor Justin Wolfers also highlighted the Fed's gloomy economic outlook, characterizing it as the board saying: "Stagflation is in the room."
"Fed statement tracker tells you what they're trying to say," Wolfers wrote in a subsequent post to his X account, quoting the Fed's assessment of higher unemployment and rising inflation. "That first paragraph represents a sharp downgrade in the Fed's confidence about our economic conditions."
Economics reporter and author Matthew C. Klein found Federal Reserve Chair Jerome Powell's summary of the rate cut as a "risk-management cut" illuminating, and posited that Trump's economy — so far defined by tariffs and mass deportations — may be the "risk" Powell was trying to manage. Political commentator Brian Allen had a similar interpretation of Powell's statement, opining that it seemed the Fed chair was warning that "the economy's breaking at both ends."
"That’s not just a recession. That’s stagflation. And it’s wearing a MAGA hat," Allen wrote. "This is the Trump economy."