Trump meets with retail CEOs to discuss tariffs
President Trump recently met with executives from major retailers, including Walmart, Home Depot, Lowe’s and Target to discuss the impact of his tariffs.
Cheddar
- The Dow is heading for its worst April since 1932, according to Dow Jones Market Data, as reported by the Wall Street Journal.
- The Federal Reserve policy committee’s next meeting is May 6 and May 7.
- Savers will still find relatively high interest rates, but they’ve fallen from 2024.
A war of words over inflation and tariffs won’t magically make interest rates tumble in the weeks ahead. And that’s true even after President Donald Trump turned to his trademark name calling by dubbing the Federal Reserve chairman a “major loser.”
But we are living in a time when such sentiments can make investors and savers even more jittery.
Wall Street racked up yet one more miserable day in a month of miserable days on April 21, once again seeing a sizable selloff in both the stock market and the bond market, as the Standard & Poor’s 500 fell 2.36% and the Dow Jones Industrial Average fell 2.48%.
The Dow is heading for its worst April since 1932, according to Dow Jones Market Data, as reported by the Wall Street Journal. Yes, the worst run in 93 years.
In case you missed it: Trump says he has ‘no intention of firing’ Federal Reserve Chairman Jerome Powell
Stocks rallied back a bit April 22 on some hope that further negotiations could lead to a de-escalation of Trump’s trade war.
Economists say no rate cut is likely in May
The Federal Reserve policy committee’s next meeting is May 6 and May 7. Most economists don’t expect the Fed to cut the short-term federal funds rate, which influences many other interest rates charged to consumers and businesses, in just a few days.
The central bank can raise or lower short-term interest rates as a way to promote maximum employment and price stability. The Fed will raise rates to cool down an overheated economy and clamp down on inflation. The Fed can cut short-term interest rates to stimulate the economy and revive job growth.
“The Fed has made it clear they will keep monetary policy unchanged until there is more clarity on the trade war and other economic policy, and that could take months,” said Mark Zandi, chief economist for Moody’s Analytics.
Wall Street apparently isn’t expecting to see clarity any time soon. This week, Trump turned up the rhetoric associated with threats to fire Fed Chair Jerome Powell, triggering more unrest in the markets. Claiming that there is virtually no inflation, Trump called for preemptive interest rate cuts.
Trump stated: “There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates.”
Trump posted on April 17: “Powell’s termination cannot come fast enough!”
Yet on April 22, Trump told reporters gathered in the Oval Office that he had no intention of firing Powell. “Never did,” Trump said, according to reports by USA TODAY, Bloomberg, CNBC and others.
Trump spoke after a swearing-in ceremony for Paul Atkins as chairman of the Securities and Exchange Commission, according to USA TODAY. “I would like to see him being a little more active in terms of his idea to lower interest rates. This is a perfect time to lower interest rates,” Trump said April 22.
Zandi said global investors can be expected to sell stocks and bonds in the days ahead on concerns that that Fed independence could be impaired, which would ultimately drive up prices and lead to higher inflation.
“Stock investors are up in arms over the president’s attack on Fed independence,” Zandi said.
History isn’t kind to U.S. presidents who tinker with the Fed. During the Nixon administration, Zandi noted, then Fed Chair Arthur Burns agreed to President Richard Nixon’s request not to raise interest rates in the lead-up to the 1972 presidential election to help juice up the economy.
The Fed kept rates low, Nixon won the election easily, Zandi noted, but continued low rates helped contribute to the runaway inflation of the 1970s and early 1980s.
Inflation continues to come down
Inflation fell in 2023 and 2024 from the 40-year high of 9.1% hit in June 2022.
The Federal Reserve finally saw inflation cool enough in 2024 to cut short-term interest rates three times — a half point cut in September, a quarter point cut in November, and a quarter-point cut in December. Short-term rates dropped by a full percentage point since late September.
The much-watched inflation gauge, the Consumer Price Index, hit 2.4% in September 2024, the smallest 12-month increase since February 2021, according to the Bureau of Labor Statistics.
Over the last 12 months, the CPI rose 2.4% in March before any seasonal adjustment. The CPI showed an improvement after gaining 2.8% year-over-year in February.
But the Fed has not cut interest rates at all yet in 2025, as economic uncertainty and the risks of higher inflation have grown worse during the Trump trade war. Trump’s tariffs during his second administration proved to be much larger and more broadly based than tariffs initiated in 2018 and 2019 during Trump’s first term as president.
Many economists expect that this round of tariffs and trade negotiations will hurt the U.S. economy, driving up the risk of a recession.
“The Fed will resume easing short-term rates later in the year, as it is clear the tariffs and trade war are seriously damaging the economy,” Zandi said.
“Long-term rates, including fixed mortgage rates, will remain roughly where they are through the end of the year despite the weaker economy, given fears over Fed independence, and questions about the safe haven status of the U.S.,” Zandi said.
Savers still can lock in some good rates
Finding an ultra-safe space to hide won’t be easy. The stock market is likely to remain volatile. The bond market has had its brutal moments.
Savings accounts and CDs are good parking spots for your emergency money, as well as money to cover bills you know you’ll face in the next year or two, such as putting a down payment on a home or paying for college tuition.
Savers can still shop for higher interest rates on their certificates of deposit, but they aren’t seeing the attractive rates that they saw a year or so ago.
“Last year’s highs are gone,” said Matt Schulz, chief consumer finance analyst for LendingTree, which acquired the site DepositAccounts.com in 2017. The site tracks interest rates paid on savings products offered to consumers.
Schulz said savers who shop around can find plenty of offers involving one-year and five-year CDs with yields of 4% or more. For one-year CDs, he said, you can find interest rates of 4.5%. For five-year CDs, annual rates can exceed 4.25%.
While rates on CDs aren’t as high as they were roughly a year ago, experts say CD rates are elevated from some low points for rates in 2020 and earlier.
“Think of this as sleep-at-night money, not get-rich-quick money,” said Ted Rossman, senior industry analyst for Bankrate.com.
“The best yields on savings products and CDs are well above the inflation rate, so it’s nice to see your purchasing power grow thanks to a risk-free investment,” Rossman said. Pay attention to make sure that your CD is covered by Federal Deposit Insurance Corp. or National Credit Union Administration insurance.
Back in October 2024, the highest promotion rate for a one-year certificate of deposit was 4.75%, according to Bankrate.com data. But that was down from the highest offer of 5.66% in January 2024.
As of April 21, Bankrate.com said, the best promotional rates on one-year CDs were a 4.4% annual percentage yield at Bask Bank, an online-only bank based in Dallas, and 4.35% at America First Federal Credit Union, which is based in Utah and has full service branches in several states but not Michigan. The CDs are offered nationwide.
The average rate on a one-year CD was 1.85% as of April 21, according to Bankrate.com. That’s down from an average of 1.98% a year ago.
The average rate on a five-year CD was 1.5% as of April 21, according to Bankrate.com. That’s roughly the same as a year ago at 1.49%.
“It’s better to get a 3% yield when inflation is 2% than an 8% return if inflation is 9%,” Rossman said.
“High rates aren’t great for borrowers, but savers are benefiting,” Rossman said.
Savers could see rates fall before year’s end, Rossman said, as many experts say the Fed could cut short-term rates by as much as a full percentage point in all in 2025.
Interest rates start falling quickly on savings products, as the Fed moves to cut rates.
Could Trump fire Powell as head of the Fed?
We’ve quickly learned to never say never as Trump has proven to be willing to take short cuts and challenge norms in the early days of his second term.
Most experts, though, would point out that the Fed’s Powell could only be forced out before his term expires “for cause.” Analysts say a difference of opinion about the direction of rates isn’t “cause” so firing a Federal Reserve chairman could end up before the U.S. Supreme Court.
The Federal Reserve operates independently when setting short-term rates and does not take direction from Congress, the president or political campaigns. Powell has repeatedly stressed that Fed action is based on economic data.
“No Fed Chair has ever been fired before,” said Charles Ballard, professor of economics emeritus at Michigan State University.
Ballard says he believes it’s pretty likely that Powell will serve out his term through May 2026. Trump nominated Powell to lead the central bank in 2017. Powell was confirmed in 2022 for a second four-year term after he was nominated by President Joe Biden. Powell was first appointed to the Fed Board of Governors by Barack Obama and took office in 2012.
Trump will choose the next chair of the Federal Reserve. But Powell has said that he planned to serve his full term as head of the central bank until it expires in about a year.
Economist Ballard is betting that Trump is villainizing Powell and setting him up now to be the scapegoat to take the blame later in case the U.S. economy sours further under the trade war.
“Remember that Trump inherited an economy that was in very good shape,” Ballard said. “No one was talking about the possibility of a recession. But now lots of analysts have suggested that a recession is a real possibility.”
The tariffs and Trump’s unpredictable moves both trigger a great deal of uncertainty for Wall Street and the U.S. economic outlook.
“Trump has never accepted responsibility for anything that has gone wrong,” Ballard said, “and he isn’t going to start now. Thus, he needs a fall guy, and Powell is the most obvious candidate.”
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
