CPI Data Exceeds Expectations, Fed's Inaction Sparks Debate
The U.S. May Consumer Price Index (CPI) data was released on June 11 local time, showing a month-over-month increase of 0.1% and a year-over-year rise of 2.4%, both below market expectations. The core CPI, excluding food and energy, maintained a year-over-year growth rate of 2.8%, also below market forecasts. This marks the lowest level of core inflation since March 2021.
Despite the "moderate" performance of the data, it remains above the Federal Reserve's target of 2%, leaving the market uncertain about the Fed's policy direction. Many Fed officials are currently adopting a "wait and see" approach, intending to further assess the long-term impacts of tariff policies on prices.
Trump and Vance Team Up to Pressure Powell
Following the release of the CPI data, U.S. President Trump quickly expressed on his social platform "Truth Social": "This is excellent data, the Fed should immediately cut rates by 1 percentage point!" He emphasized that doing so would significantly reduce the interest payments on upcoming government debt, "It's too important!!!"
Shortly after, U.S. Vice President Vance also publicly stated on the X platform: "The President has said it before, and it's even clearer now: if the Fed refuses to cut rates, it will be a dereliction of monetary policy." This statement is seen as another attack by the Trump administration on Powell and his policy stance, reinforcing the administration's pressure on the central bank.
Treasury Secretary Emphasizes Inflation Easing
U.S. Treasury Secretary Scott Besant pointed out in his testimony to the Congressional Budget Committee that U.S. inflation is at its lowest level since 2021, primarily benefiting from a slowdown in the price increases of housing, food, and energy. He also stated that the high prices of the past four years indeed lowered people's living standards, but "under the Trump administration's policy influence," inflation has significantly improved.
Besant's remarks are interpreted as an attempt to claim credit for the upcoming election cycle and to associate recent economic improvements with the current administration's monetary policy stance.
What Will the Fed Do Next?
Despite the pressure from the President and Vice President, the market still does not expect the Fed to initiate a rate-cutting process in the short term. According to the Chicago Mercantile Exchange (CME) FedWatch tool, it is unlikely that the June rate meeting will result in a policy adjustment, with the market generally believing that the first rate cut may be postponed to September.
Meanwhile, Fed officials remain cautious, emphasizing the need to "see more stable data trends" to assess the impact of structural variables such as tariffs on long-term prices. Some opinions suggest that acting prematurely could lead to policy misjudgments.
The Rate Cut Debate Sparks New Round of Political Confrontation
Currently, U.S. economic data is wavering between positive and negative aspects, with inflation easing but not entirely cooled. Whether the Fed will cut rates has become not just an economic issue but a hot topic of political contention.
The Trump camp is evidently laying the groundwork for the 2026 Fed leadership change, signaling a "more lenient" policy if new leaders take office. This approach of guiding market expectations in advance may be establishing a public opinion foundation for the "shadow Fed chair" strategy.
