The previous one percentage point (ppt) cut was in March 2020 when the COVID-19 pandemic brought the economy to a standstill.

The market rally set in motion by the tame May consumer price inflation (CPI) report released on Wednesday petered out as fears over uncertainties on multiple fronts ruled high. However, President Donald Trump cheered the number, using it again as an argument to step up his call for a rate cut.

In a post on his Truth Social handle, shortly after the release of the inflation print, Trump said, “CPI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT.”

Earlier this month, after May's non-farm payroll data came in higher than expected, Trump demanded a full percentage point rate cut.

The previous one percentage point (ppt) cut was in March 2020 when the COVID-19 pandemic brought the economy to a standstill. With that cut, the Fed funds rate was brought to near-zero levels (0%-0.25%), at which it was maintained for the next two years.

A series of rate hikes over the next year took the Fed rate to a 22-year high of 5.25%-5.50% in July 2023 as the central bank reacted to rising inflationary pressure. The central bank held fire for another year before bringing down the rate to the current 4.25%-4.50%, thanks to three straight cuts.

The president has previously expressed his displeasure with Federal Reserve Chair Jerome Powell’s data-dependent stance, even calling for his resignation. However, negative market reaction to the political interference in the Fed’s affairs has forced him to tone down his rhetoric since then.

Trump’s point about rate cuts alleviating the U.S. interest burden comes when the country’s debt level is fast approaching a never-before $37 trillion.

According to the Congressional Budget Office (CBO) estimates, the government’s net interest payment will likely exceed $1 trillion in 2025 and balloon to nearly $1.8 trillion in 2035.

The Bureau of Labor Statistics' (BLS) May data showed that inflation came in below expectations for a fourth consecutive month. 

LPL Financial Chief Economist Jeffrey Roach said the prices of apparel and autos, a category highly sensitive to tariffs, fell in May, suggesting that companies may have absorbed tariff costs. 

“But don’t expect that to continue,” he added.

Comerica’s Bill Adams expressed similar sentiment. “There’s a limit to how long businesses will absorb higher input prices. Inflation looks likely to pick up in the second half of the year,” the economist said.

He sees the forward-looking inflation measures to keep the Fed from breathing easy.

Meanwhile, an ongoing Stocktwits poll that has received over 6,000 responses so far found that most traders (46%) were buying stocks after the cooler-than-expected May inflation data.

The percentage of respondents who said they held steady was 22%, while those who were taking profits made up 23% of the total. Only 9% said they waited for more data to confirm the tame inflation data.

The Invesco QQQ Trust (QQQ) ETF and the SPDR S&P 500 ETF (SPY) are up 4.3% and 2.9%, respectively, for the year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<