Republicans break with Trump, back Fed ahead of rate cut

Donald Trump is on a collision course with his fellow Republicans on Capitol Hill over Federal Reserve policy, with a clash looming next week when the central bank cuts interest rates.

The former president has warned that rate cuts are “something that they know they shouldn’t be doing” before the November elections. The Fed move, its first reduction in borrowing costs in four years, will begin to provide relief to a job market that’s showing signs of weakening.

With economic fears rising, some of Trump’s allies on Capitol Hill aren’t echoing his warning to the Fed about election interference and instead say it’s the right call to lower rates. Many GOP lawmakers said in interviews this week that the Fed should act because of worrying indicators that the economy could be slowing down.

“It is time for a rate cut,” said Sen. John Kennedy of Louisiana. “This economy — particularly the labor market — is softening very, very, very quickly.”

GOP lawmakers’ support for the cut signals that they’re willing to give the Fed room to drive decision-making on monetary policy, despite Trump’s stated desire to have more say over it . Next week’s move by Fed Chair Jerome Powell and his colleagues could become a flash point over the independence of the central bank and provide an early window into how Republicans would respond to Trump’s attempts to pressure the Fed if he’s reelected.

“The time is right,” said GOP Rep. Dan Meuser , a Trump supporter from the battleground state of Pennsylvania. “You’ve got to put the greater good ahead of looking political.”

Trump has a long history of accusing the Fed of conspiring against him. He said then-Fed Chair Janet Yellen kept rates low in 2016 to boost Democrats. Trump has said he expects Powell to do the same this year. Powell, a Republican, was a frequent target of Trump’s criticism during his presidency despite being his hand-picked Fed chair.

While some GOP lawmakers have followed Trump’s lead, recent economic indicators appear to be a driving concern for others. Unlike Trump, Republicans in Congress currently hold office and could be held responsible by voters for a downturn.

“When you think about it, a rate cut is a cost cut,” Meuser said. “It’s a stimulus to the economy, it’s something that’s needed. It’s a pro-growth initiative.”

The Fed is facing new pressure to cut rates because of growing concerns about a potential spike in unemployment. Coupled with mounting evidence that Covid-era inflation is tamped down, it’s all but assured that the Fed will ease borrowing costs next week. The big question is by what magnitude it will begin to change course. The Fed raised rates 11 times in 2022 and 2023 to bring down rapid price increases.

RNC spokesperson Anna Kelly said in a statement that “President Trump has repeatedly said that he wants to bring down mortgage and interest rates as quickly as possible by cutting energy prices in half and declaring a national energy emergency.”

Kelly said that Vice President Kamala Harris “has broken our economy and wreaked havoc with her pro-inflation policies" and that “the only way to reignite economic growth is by sending President Trump back to the White House.”

The disconnect between Trump and fellow Republicans on the Fed reveals uncoordinated messaging on the state of the economy. The forces compelling the Fed to cut are signs that the economy is softening under President Joe Biden, which is how GOP lawmakers are choosing to frame the issue as they back the decision to lower rates.

“They’re high because of President Biden’s economic policy, and I think they need to come down,” Sen. Josh Hawley of Missouri said. “I don’t want them to act in a political manner, I want them just to do their job. I wish they’d have done it sooner.”

Some Republicans, including Kennedy, want the Fed to make a big cut — half a percentage point instead of a quarter — just like a number of progressive Democrats.

“When you look at these job numbers, the labor market is really softening quickly,” Kennedy said, adding that he would have supported a smaller cut only a month ago. Kennedy serves on the Senate Banking Committee, which has jurisdiction over the Fed.

Some Republicans aren’t yet on board. Rep. John Rose of Tennessee said “it may be a little soon” for the Fed to act.

“It may be just pushing it a little bit too quickly, and then when you add in the political element to that, then I think it’s a little questionable,” he said.

Powell has long said that the election plays no role in Fed decision-making.

“We never use our tools to support or oppose a political party, a politician, or any political outcome,” he said in July.

Sen. Thom Tillis , a North Carolina Republican on Senate Banking, said the Fed should abide by its legal mandate to maintain stable prices and promote maximum employment.

“It does look like there's an increasing body of work, including members of the Fed that are conservative-leaning, saying it's probably time to do it,” Tillis said of a cut. “That's the way the Fed should operate. People could call it political. All I care about is how it's affecting working families. And they need help right now.”