Trump says U.S. interest rate is at least 3 points too high

Key Points

• It seems likely that Donald Trump, on July 9, 2025, stated the U.S. interest rate is at least 3 points too high, calling for a reduction from around 4.5% to 1.5% or lower.

• Research suggests the Federal Reserve has kept rates steady at 4.25%-4.5%, citing economic uncertainty from tariffs, with plans for potential cuts later in 2025.

• The evidence leans toward controversy, with Trump arguing for lower rates to reduce refinancing costs, while the Fed prioritizes managing inflation risks.

Trump's Statement

On July 9, 2025, Donald Trump claimed on Truth Social that the U.S. interest rate is at least 3 points too high, suggesting it should be lowered by at least 3 percentage points. He argued this would save the U.S. $360 billion per percentage point per year in refinancing costs, stating there is no inflation and companies are investing in America.

Federal Reserve's Stance

The Federal Reserve has maintained interest rates at 4.25%-4.5%, with the effective rate around 4.33%. Recent statements indicate they are waiting to see the impact of Trump's tariff policies before cutting rates, with projections for two cuts by the end of 2025.

Economic Context

Economic forecasts suggest tariffs could lower GDP growth, raise inflation, and weaken the labor market, influencing the Fed's cautious approach. Trump's call for lower rates contrasts with the Fed's focus on managing potential inflationary pressures.

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Comprehensive Analysis of Trump's Claim on U.S. Interest Rates

This note provides a detailed examination of Donald Trump's statement on July 9, 2025, that the U.S. interest rate is at least 3 points too high, calling for a significant reduction. The analysis covers Trump's exact claim, the current Federal Reserve stance, economic forecasts, and reactions from experts, as observed at 10:16 AM PDT on Wednesday, July 9, 2025. The information is drawn from recent news reports, official statements, and economic data, offering a thorough overview of the situation.

Trump's Statement and Context

On July 9, 2025, U.S. President Donald Trump posted on Truth Social, stating, "Our Fed Rate is AT LEAST 3 Points too high. ‘Too Late’ is costing the U.S. 360 Billion Dollars a Point, PER YEAR, in refinancing costs. No Inflation, COMPANIES POURING INTO AMERICA. ‘The hottest Country in the World!’ LOWER THE RATE!!!" This comment, reported by Reuters, Investing.com, and Yahoo Finance, among others, calls for the Federal Reserve to lower the federal benchmark interest rate by at least 3 percentage points, implying a reduction from the current rate of around 4.5% to 1.5% or lower.

Trump's argument is that high interest rates are increasing the cost of servicing the nation's debt, estimating a $360 billion annual cost per percentage point in refinancing. He also claims there is no inflation and that companies are investing in the U.S., suggesting the economy is strong enough to handle lower rates. This statement is part of his ongoing criticism of the Federal Reserve, particularly Fed Chair Jerome Powell, whom he has previously accused of being "too late" in monetary policy decisions.

Current U.S. Interest Rates

As of July 2025, the Federal Reserve has maintained the federal funds rate target range at 4.25% to 4.50%, with the effective federal funds rate (EFFR) around 4.33%, stable since early 2025. This information is confirmed by Trading Economics, the Federal Reserve's H.15 Selected Interest Rates release on July 7, 2025, and FRED data from the St. Louis Fed, updated on July 1, 2025. The rate has been held steady since December 18, 2024, after a 25 basis point reduction from the previous range of 4.50%-4.75%.

The Federal Reserve's latest meeting, as of June 18, 2025, kept rates unchanged, with the FOMC indicating two rate cuts by the end of 2025, as noted in CNBC's coverage. The next FOMC meeting is scheduled for July 29-30, 2025, but no decision has been announced yet, as per the Fed's calendar.

Federal Reserve's Stance and Economic Outlook

The Federal Reserve's decision to hold rates steady is influenced by economic uncertainties, particularly from Trump's tariff policies. Fed Chair Jerome Powell, in a statement on July 1, 2025, as reported by CNBC, confirmed that the Fed would have cut rates this year if not for the tariffs, indicating that the current policy is a response to potential inflationary pressures. Powell noted, "The effects on inflation could be short-lived—reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent," highlighting the uncertainty.

The Fed's June 18, 2025, projections, accessible via the Federal Reserve's website, show expectations of higher inflation and slower growth, with the "dot plot" indicating a fed funds rate around 3.4% by 2027, suggesting gradual easing. The Conference Board's economic forecast from June 10, 2025, estimates that tariffs will substantially lower GDP growth, raise inflation, weaken the labor market, and prompt Fed rate cuts, aligning with the Fed's cautious approach.

Deloitte Insights' Q2 2025 forecast, updated on June 24, 2025, indicates robust consumer spending and high business investment, but notes uncertainty weighing on the outlook, particularly due to policy shifts. The Atlanta Fed's GDPNow model, updated on July 3, 2025, estimates real GDP growth at 2.6% for Q2 2025, up from 2.5%, but still reflects cautious optimism.

Economic Implications and Expert Reactions

Trump's call for a 3-point rate cut, which would bring rates to around 1.5%, is seen as aggressive and typically associated with recessionary conditions, as noted by Bloomberg Opinion on July 7, 2025. Bill Dudley, a former Fed president, argued that Trump's approach could have the opposite effect, potentially increasing inflation and complicating monetary policy. The current rate of 4.5% is considered restrictive, aimed at taming inflation, which has been "somewhat elevated," as per NBC News' coverage of the May 2025 Fed decision.

Reactions to Trump's comment include concerns about political interference in monetary policy. Powell has repeatedly stated that the Fed does not consider political factors, as noted in CNN Business on June 30, 2025, emphasizing the Fed's focus on economic data. Two Fed governors, both Trump appointees, have suggested possible rate cuts as early as July, but not to the extent Trump demands, indicating internal debate.

NPR's report on May 7, 2025, highlighted that the Fed is waiting to see the impact of tariffs on prices and growth, with Trump's policies seen as a "radical and potentially risky approach to trade." This aligns with the Fed's decision to hold rates, despite market bets on cuts, as reported by Reuters on April 30, 2025.

Comparative Analysis of Interest Rate Positions

To provide a clearer picture, the following table compares Trump's position with the Federal Reserve's stance:

Aspect	Trump's Position	Federal Reserve's Stance
Desired Rate	At least 3 points lower, ~1.5% or less	Current 4.25%-4.5%, potential cuts to ~3.4% by 2027
Reasoning	Reduces refinancing costs, no inflation	Managing tariff-induced inflation, economic uncertainty
Timing	Immediate cuts demanded	Waiting for data, potential cuts by end of 2025
Economic Impact Claimed	Saves $360B per point per year	Concerns about higher inflation, slower growth

This table highlights the significant divergence, with Trump pushing for immediate and deep cuts, while the Fed takes a data-dependent, cautious approach.

Broader Context and Historical Perspective

Trump's criticism of the Fed is not new; during his first term, he frequently called for lower rates, arguing he understood monetary policy better than Fed officials, as reported by Reuters on January 23, 2025. His current stance is part of a broader economic strategy, including tariffs, which he believes will boost domestic manufacturing but are seen by many economists as inflationary, as noted in The Hill's coverage on June 18, 2025.

The Fed's independence is a key issue, with Powell emphasizing that political factors do not influence rate decisions, as per CNN Business on June 24, 2025. Trump's demand for ultra-low rates, such as 1%, is seen as unusual outside recessionary conditions, with Bloomberg Opinion suggesting it could destabilize markets.

Conclusion

Trump's claim on July 9, 2025, that U.S. interest rates are at least 3 points too high reflects his desire for immediate, significant rate cuts to reduce refinancing costs, arguing there is no inflation. However, the Federal Reserve has maintained rates at 4.25%-4.5%, citing economic uncertainty from tariffs, with plans for potential cuts later in 2025. Economic forecasts suggest tariffs could lead to higher inflation and lower growth, influencing the Fed's cautious approach. The controversy lies in Trump's push for political influence over monetary policy, contrasting with the Fed's data-driven strategy, as observed on July 9, 2025.

Citations:

• Reuters: Trump says U.S. interest rate is at least 3 points too high

• Federal Reserve: H.15 - Selected Interest Rates (Daily) - July 07, 2025

• The Conference Board: Economic Forecast for the US Economy

• CNN Business: Powell says the Fed would have cut rates this year if it weren’t for tariffs

• Bloomberg: Trump and Interest Rates: This Isn't How You Lower Them

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