Finance

In 2024, several fintechs — including Robinhood, Revolut and Monzo — saw a boost to their bottom lines from higher interest rates.
Now, they face a key test as a broad decline in interest rates raises doubts about the sustainability of relying on this heightened income over the long term.
Lindsey Naylor, partner at Bain & Company, said dropping benchmark rates could be “a test of the resilience of fintech firms’ business models.”

The app icons for Revolut and Monzo displayed on a smartphone.
Betty Laura Zapata | Bloomberg via Getty Images

Financial technology firms were initially the biggest losers of interest rate hikes by global central banks in 2022, which led to tumbling valuations.
With time though, this change in the interest rate environment steadily boosted profits for fintechs. This is because higher rates boost what’s called net interest income — or the difference between the rates charged for loans and the interest paid out to savers.

In 2024, several fintechs — including Robinhood, Revolut and Monzo — saw a boost to their bottom lines as a result. Robinhood reported $1.4 billion in annual profit, boosted by a 19% jump in net interest income year-over-year, to $1.1 billion.
Revolut also saw a 58% jump in net interest income last year, which helped lift profits to £1.1 billion ($1.45 billion). Monzo, meanwhile, reported its first annual profit in the year ending March 31, 2024, buoyed by a 167% increase in net interest income.

Now, fintechs — and especially digital banks — face a key test as a broad decline in interest rates raises doubts about the sustainability of relying on this heightened income over the long term.
“An environment of falling interest rates may pose challenges for some fintech players with business models anchored to net interest income,” Lindsey Naylor, partner and head of U.K. financial services at Bain & Company, told CNBC via email.
Falling benchmark interest rates could be “a test of the resilience of fintech firms’ business models,” Naylor added.

“Lower rates may expose vulnerabilities in some fintechs — but they may also highlight the adaptability and durability of others with broader income strategies.”
It’s unclear how significant an impact falling interest rates will have on the sector overall. In the first quarter of 2025, Robinhood reported $290 million of net interest revenues, up 14% year-over-year.
However, in the U.K., results from payments infrastructure startup ClearBank hinted at the impact of lower rates. ClearBank swung to a pre-tax loss of £4.4 million last year on the back of a shift from interest income toward fee-based income, as well as expenditure related to its expansion in the European Union.

“Our interest income will always be an important part of our income, but our strategic focus is on growing the fee income line,” Mark Fairless, CEO of ClearBank, told CNBC in an interview last month. “We factor in the declining rates in our planning and so we’re expecting those rates to come down.”

Income diversification

It comes as some fintechs take steps to try to diversify their revenue streams and reduce their reliance on income from card fees and interest.
For example, Revolut offers crypto and share trading on top of its payment and foreign exchange services, and recently announced plans to add mobile plans to its app in the U.K. and Germany.
Naylor said that “those with a more diversified mix of revenue streams or strong monetization of their customer base through non-interest services” are “better positioned to weather changes in the economy, including a lower rates environment.”
Dutch neobank Bunq, which targets mainly “digital nomads” who prefer not to work from one location, isn’t fazed by the prospect of interest rates coming down. Bunq saw a 65% jump in annual profit in 2024.

“We’ve always had a healthy, diverse income,” Ali Niknam, Bunq’s CEO, told CNBC last month. Bunq makes money from subscriptions as well as card-based fees and interest.
He added that things are “different in continental Europe to the U.K.” given the region “had negative interest rates for long” — so, in effect, the firm had to pay for deposits.
“Neobanks with a well-developed and diversified top line are structurally better positioned to manage the transition to a lower-rate environment,” Barun Singh, fintech research analyst at U.K. investment bank Peel Hunt, told CNBC.
“Those that remain heavily reliant on interest earned from customer deposits — without sufficient traction in alternative revenue streams — will face a more meaningful reset in income expectations.” More

The U.S.-China tariff cuts, even if only for 90 days, address a major pain point: Christmas presents.
Nearly one-fifth of U.S. retail sales last year came from the Christmas holiday season, according to data from the National Retail Federation.
Still, tariffs on certain products remain higher than before the additional duties kicked in during the escalation in trade tensions last month.
For running shoes produced in China, the total tariff is now 47%, still well above the 17% level in January, said Tony Post, CEO and founder of Massachusetts-based Topo Athletic.

A worker finishes red Santa Claus hats for export at a factory on April 28, 2025, near Yiwu, Zhejiang province, China.
Kevin Frayer | Getty Images News | Getty Images

BEIJING — The U.S.-China tariff cuts, even if temporary, address a major pain point: Christmas presents.
Nearly a fifth of U.S. retail sales last year came from the Christmas holiday season, according to CNBC calculations based on data from the National Retail Federation. The period saw a 4% year-on-year sales increase to a record $994.1 billion.

“With the speed of Chinese factories, this 90-day window can resolve most of the product shortages for the U.S. Christmas season,” Ryan Zhao, director at export-focused company Jiangsu Green Willow Textile said Monday in Chinese, translated by CNBC.
His company had paused production for U.S. clients last month. He expects orders to resume but not necessarily to the same levels as before the new tariffs kicked in since U.S. buyers have found alternatives to China-based suppliers in the last few weeks.
U.S. retailers typically place orders months in advance, giving factories in China enough lead time to manufacture the products and ship them to reach the U.S. ahead of major holidays. The two global superpowers’ sudden doubling of tariffs in early April forced some businesses to halt production, raising questions about whether supply chains would be able to resume work in time to get products on the shelves for Christmas.

“The 90-day window staves off a potential Christmas disaster for retailers,” Cameron Johnson, Shanghai-based senior partner at consulting firm Tidalwave Solutions, said Monday.
“It does not help Father’s Day [sales] and there will still be impact on back-to-school sales, as well as added costs for tariffs and logistics so prices will be going up overall,” he said.

But U.S. duties on Chinese goods aren’t completely gone.
The Trump administration added 20% in tariffs on Chinese goods earlier this year in two phases, citing the country’s alleged role in the U.S. fentanyl crisis. The addictive drug, precursors to which are mostly produced in China and Mexico, has led to tens of thousands of overdose deaths each year in the U.S.
The subsequent tit-for-tat trade spat saw duties skyrocketing over 100% on exports from both countries.
While most of those tariffs have been paused for 90 days under the U.S.-China’s new deal announced Monday, the previously-imposed tariffs will remain in place.
UBS estimates that the total weighted average U.S. tariff rate on Chinese products now stands around 43.5%, including pre-existing duties imposed in past years.
For running shoes produced in China, the total tariff is now 47%, still well above the 17% level in January, said Tony Post, CEO and founder of Massachusetts-based Topo Athletic. He said his company received some cost reductions from its China factories and suppliers, but still had to raise prices slightly to offset the tariff impact.
“While this is good news, we’re still hopeful the two countries can reach an acceptable permanent agreement,” he said. “We remain committed to our Chinese suppliers and are relieved, at least for now, that we can continue to work together.”

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U.S. retail giant Walmart declined to confirm the impact of the reduced tariffs on its orders from China.
“We are encouraged by the progress made over the weekend and will have more to say during our earnings call later this week,” the company said in a statement to CNBC. The U.S. retail giant is set to report quarterly results Thursday.
China’s exports to the U.S. fell by more than 20% in April from a year ago, but overall Chinese exports to the world rose by 8.1% during that time, official data showed last week. Goldman Sachs estimated around 16 million Chinese jobs are tied to producing products for the U.S. More

Coinbase is joining the S&P 500, replacing Discover Financial, which is being acquired.
Shares of the crypto exchange soared in extended trading after the announcement.
Bitcoin eclipsed the $100,000 market last week, approaching its record reached in January.

Brian Armstrong, CEO of Coinbase, speaking on CNBC’s Squawk Box outside the World Economic Forum in Davos, Switzerland on Jan. 21st, 2025.
Gerry Miller | CNBC

Coinbase is joining the S&P 500, replacing Discover Financial Services in the benchmark index, according to a release on Monday. Shares of the crypto exchange jumped 8% in extended trading.
The change will take effect before trading on May 19. Discover is in the process of being acquired by Capital One Financial.

Since going public through a direct listing in 2021, Coinbase has become a bigger part of the U.S. financial system, with bitcoin soaring in value and large institutions gaining regulatory approval to create spot bitcoin exchange-traded funds.
Bitcoin spiked last week, topping $100,000 and nearing its record price reached in January.
However, Coinbase has been a particularly volatile stock and is trading well below its peak from late 2021. The shares closed on Monday at $207.22, giving the company a market cap of $53 billion. At its high, the stock traded at over $357.
Stocks added to the S&P 500 often rise in value because funds that track the S&P 500 will add it to their portfolios.
The index, which is heavily weighted towards tech because of the massive market caps of the industry’s heavyweights, continues to add companies from across the sector. In September, Dell and defense software provider Palantir were added to the S&P 500, following artificial intelligence server maker Super Micro Computer and security software vendor CrowdStrike earlier last year.

To join the S&P 500, a company must have reported a profit in its latest quarter and have cumulative profit over the four most recent quarters.
Coinbase last week reported net income of $65.6 million, or 24 cents a share, down from $1.18 billion, or $4.40 a share a year earlier, after accounting for the fair value of its crypto investments. Revenue rose 24% to $2.03 billion from $1.64 billion a year ago.
Also last week, Coinbase announced plans to buy Dubai-based Deribit, a major crypto derivatives exchange for $2.9 billion. The deal, which is the largest in the crypto industry to date, will help Coinbase broaden its footprint outside the U.S.
Coinbase shares are down 17% this year, underperforming bitcoin, which is now up about 10% over that stretch.
WATCH: Bitcoin surges past $100k More

The average effective tariff rate on imports is 17.8%, the highest since 1934, even after trade deals reached with China and the U.K. in recent days, according to the Yale Budget Lab.
Levies that President Donald Trump placed on other products and countries still remain, including a 10% tariff on almost all trading partners.

A cargo ship moors at the container terminal berth of Lianyungang Port for loading and unloading containers in Lianyungang City, Jiangsu Province, China, on May 9, 2025.
Nurphoto | Nurphoto | Getty Images

The tariff rate the U.S. puts on imports remains higher than any point since the 1930s, despite trade deals struck with China and the United Kingdom in recent days, according to a Yale Budget Lab report issued Monday.
The total U.S. average effective tariff rate is 17.8% — the highest since 1934 — even after accounting for these policy changes, according to the Yale Budget Lab.

That is equivalent to an increase of 15.4 percentage points from the average effective tariff rate before Trump’s second term, the report said.
Current tariff policies in effect are expected to cost the average household $2,800 over the “short run,” according to the report. It does not specify a time frame.

China and U.K. trade deals

U.S. officials agreed Monday to slash duties on China to 30% total, down from at least 145%, for 90 days as they continue economic and trade discussions. China dropped its duty on U.S. exports to 10% from 125%.
President Donald Trump also announced a deal with the U.K. on Thursday. While light on specifics, the president confirmed a 10% tariff would remain in place and that the first 100,000 imported U.K. automobiles will be tariffed at 10% rather than 25%, for example.
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The White House has enacted many other tariffs, including a 10% across-the-board tariff on most U.S. trading partners. There are additional levies tied to specific products such as steel, aluminum and automobiles, and certain imports from Canada and Mexico.

Consumers will likely alter their buying

Prior to the China and U.K. trade pacts, consumers faced an overall average effective tariff rate of 28%, the highest since 1901, the Yale Budget Lab estimated in a prior analysis on April 15.
The estimated decline from that average tariff rate “is almost entirely due to the lower rates on Chinese imports — the US-UK trade deal has minimal effects on average tariff rates,” its most recent report said.
Businesses and consumers are likely to change their purchase behavior to avoid the higher costs associated with tariffs, especially from China, according to economists.

After accounting for these substitution effects, the average effective tariff rate would be 16.4%, the highest since 1937, the Yale Budget Lab estimates.
The timing of that substitution is “highly uncertain,” it said.
“Some shifts are likely to happen quickly — within days or weeks — while others may take longer,” according to the report.

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Bitcoin’s milestone week comes as new crypto exchange-traded funds are hitting the market.
Investor and best-selling personal finance author Ric Edelman thinks the rollout gives investors more access to upside.

He finds buffer ETFs and yield ETFs particularly exciting.
“You can now invest in bitcoin ETFs that protect you against the downside volatility while preserving your ability to enjoy the upside profits,” Edelman told CNBC’s “ETF Edge” this week.” You can generate massive amounts of yield, much more than you can in the stock market.”
Edelman is the founder of the Digital Assets Council of Financial Professionals, which educates financial advisors on cryptocurrencies. He is also in Barron’s Financial Advisor Hall of Fame.
“Crypto is meant to be a long-term hold, just like the stock market,” said Edelman. “It’s meant to diversify the portfolio.”
His thoughts came as a bitcoin rally got underway. The cryptocurrency crossed $100,000 on Thursday for the first time since February. As of Friday’s close on Wall Street, bitcoin gained 6% this week. It is now up almost 10% so far this month.

However, Edelman sees problems when it comes to leverage and inverse bitcoin ETFs. He warned that not all crypto ETFs are appropriate for retail investors, suggesting most don’t understand how they work.

‘Same thing as buying a lottery ticket’

“These leveraged ETFs often have an assumption you’re going to hold the fund for a single day, a daily reset,” he said. “That’s literally the same thing as buying a lottery ticket. This isn’t investing.”
During the same interview, “ETF Edge” host Bob Pisani referenced 2x Bitcoin Strategy ETF (BITX) as an example of a leveraged bitcoin product that includes daily fees and resets.
The fund is beating bitcoin this week, jumping more than 12%. So far this month, the ETF is up 19%. But the BITX is underperforming bitcoin this year. It is up about 1.5%, while bitcoin is up roughly 10%.
Volatility Shares is the ETF provider behind BITX.
The company writes on its website: “The Fund is not suitable for all investors … An investor in the Fund could potentially lose the full value of their investment within a single day.”

Disclaimer More

Ric Edelman says the U.S. is failing its younger generations on personal finance education: “We stink at it,” he told CNBC’s “ETF Edge.”
Students are not provided with knowledge early enough in life and a get-rich-quick attitude is preventing younger people from investing correctly for long-term financial success.

One of the most recognized names in personal finance is urging Americans to increase their financial literacy, and urging the country to do a better job of providing the education. 
“We spend a lot of time trying to improve financial literacy. We stink at it,” said Ric Edelman, founder of Edelman Financial Engines, on this week’s CNBC “ETF Edge.”

Edelman believes the problem is rooted in the fact the U.S. has never had a great tradition of encouraging smart personal finance, and he says it has never been more important to fix, given how long people are now living. That increases the risks related to running out of money later in life and creates serious questions about standard investing models for long-term financial security, such as the 60-40 stock and bond portfolio.
“We are the first generation, as baby boomers, that will live long lives as part of the norm,” Edelman said. “Everyone before us, our parents and grandparents mostly died in their 50s and 60s. You didn’t have to plan for the future, because you weren’t going to have one,” he added.
One of his biggest concerns with the current generation of young investors is that they seem to believe in get-rich-quick schemes. Many of the new investing websites have been too encouraging of risky strategies that lure young investors in, he says, promoting financial gambling rather than investing. Options and zero-day options have become a significant part of the daily trading landscape in the last several years. According to data from the New York Stock Exchange, the percent of retail traders participating in the options market approached the 50% mark in 2022. In 2024, options volume hit an all-time record.
Edelman says younger generations should be wary of a corporate America that makes consumer finance more complicated than it should be, which includes the manufacturing of overly sophisticated and expensive financial products. “They want to make it complex, to make you a hostage rather than a customer,” he said. 
He also cautions young investors to make sure they are getting information about personal finance from credible sources. “When so many are getting their financial education from TikTok, that’s a little scary,” he said.

Edelman believes the cards are stacked against young investors because of the lack of high schools mandating a course in personal finance. “The only way we discover the issues of money is through the school of hard knocks as adults, and we’re over our heads when it comes to buying a car, getting a mortgage, insurance and saving for college” he said. 
That situation is improving for the next generations of adults. Utah was the first state to require a personal finance course for high school graduation in 2004, and the list grew to include 11 states by 2021. As of this year, 27 states now require high school students to take a semester-long personal finance course for graduation, according to Next Gen Personal Finance. 
Another big challenge for young investors is they often don’t have a lot of money to invest, with many recent college graduates struggling to pay bills and left with little to put towards other financial goals. But there is at least one reason to be hopeful about younger Americans, Edelman says: they are highly motivated to reach financial success.
“Today’s youth looks at their parents and sees how poorly they were prepared for retirement. They don’t want that to be their future” he said. More

International tourists are skipping trips to the U.S. amid tensions tied to trade, immigration and territory.
Many businesses that rely on foot traffic from overseas visitors are already seeing a financial hit, even before heading into peak travel season.
New York, Miami, Los Angeles, Orlando, San Francisco and Las Vegas are examples of cities with a large share of foreign visitors.

Kaia Matheny (left) and Nora Lamphiear (right), co-owners of Adrift Restaurant in Anacortes, Washington.
Kaia Matheny.

Anacortes, a small coastal town in Washington state, typically bustles with tourists during the summer months.
But local business owners like Kaia Matheny are bracing for less foot traffic — and a financial hit — this year as tensions around trade and concerns about immigration policy push foreigners to reconsider the U.S. as a travel destination.

Matheny is the co-owner of Adrift Restaurant, a nautical themed farm-to-table eatery in downtown Anacortes. The town, a gateway to the San Juan islands, is a two-hour drive south of Vancouver.
She’s seen sales fall amid fewer customers from Canada, which is generally the U.S.’ top source of international visitors. Air and land arrivals from Canadians fell 14% and 32%, respectively, in March compared to the same time in 2024, according to Tourism Economics.
A sharp decline in foot traffic among foreign tourists looks set to persist through summer, data shows. Matheny is “wary” about what that will mean during peak season, which typically kicks off in June.
Tourism “won’t be what it is usually,” Matheny said. “We’ll batten down the hatches and make the best of it.”

A ‘quickly souring’ travel outlook

Tourism is a big U.S. export: Foreign visitors spent more than $180 billion here in 2024, more than all agricultural exports combined, said Geoff Freeman, president and CEO of the U.S. Travel Association.

However, international visits to the U.S. fell 12% year-over-year in March, according to Oxford Economics.
It’s not just Canada: Visits from Western Europe, Asia and South America — historically the U.S.’ highest-value travel markets — are also down by double-digit percentages, according to the U.S. Travel Association.

Data suggests the weakness will persist through the summer.
Air bookings for overseas summer travel to the U.S. are pacing about 10% behind the same time last year, according to Tourism Economics, which is affiliated with Oxford Economics. (These were bookings made as of March.)
Canada and Mexico are worse, data show. Summer bookings from Canada to the U.S. are down more than 30%, for example.
“Foreign visitations to the US are the largest services export in the country and the outlook is quickly souring,” Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a research note published in May.
The loss in international tourism is expected to cost the U.S. economy $10 billion this year compared to 2024, said Adam Sacks, president of Tourism Economics. The U.S. Travel Association pegs the potential loss at an even higher $21 billion in 2025, if current travel trends continue.
“It’s alarming,” Freeman said. Many businesses and destinations “count on the international visitor, in particular.”

The tourism pullback appears to be “more a U.S. issue right now” rather than a broad global weakness in travel, since other regions are seeing positive tourism growth, said Lorraine Sileo, senior analyst and founder of Phocuswright Research, a market research firm.
Domestic tourism isn’t poised to pick up the slack — the market was slowing heading into 2025 and the “revenge travel” trend, which had propelled Americans to travel due to pent-up demand after Covid-19 lockdowns, has largely been played out, she said.
“I don’t think it’s all doom and gloom for the U.S. travel industry,” Sileo said. “But it’ll be a tough year.”

Travelers have ‘a great deal of fear’

U.S. Customs and Border Protection in Newark Liberty International Airport.
Nicolas Economou/NurPhoto via Getty Images

Many factors underpin the decline in international visitors, travel experts said.
For one, President Donald Trump has announced several rounds of tariffs, sparking fears of a global trade war and raising the average import duties to the highest level since the early 1900s.
Trade wars are “intrinsically combative” with the international community, Sacks said.
In early April, China issued a risk alert for tourists heading to the U.S., citing deteriorating economic relations and domestic security. Several European nations also recently issued U.S. travel advisories, citing reasons such as heightened border security and potential issues around travel documents.
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Trump has also drawn the ire of Canadian citizens and lawmakers through repeated suggestions that Canada become the 51st U.S. state, experts said. Likewise for Greenland, which is part of Denmark.
“Now is also the time to choose Canada,” former Prime Minister Justin Trudeau said during a speech in February. “It might mean changing your summer vacation plans to stay here in Canada and explore the many national and provincial parks, historical sites and tourist destinations our great country has to offer,” he added.
Searches conducted in March and April from Canadians for travel to the U.S. dropped 50% from 2024, according to Beyond, a data provider on the global short-term rental market.

“We saw a nearly immediate drop in Canadian search activity after the tariff news broke back in February,” Julie Brinkman, CEO of Beyond, wrote in an e-mail. “While interest in the U.S. dropped, Mexico saw a 35% increase in searches. That tells us travelers aren’t canceling trips — they’re choosing new destinations.”
Anecdotes on social media support that notion.
“Proud to say we’ve cancelled 3 US based cruises over the next 2 years and instead will be vacationing in Europe and Canada,” one Reddit commenter wrote recently.

Growing concern tied to U.S. immigration policy is perhaps the most consequential development in recent months, experts said.
“Whether fair or not, a perception is taking hold that more people are being detained, more devices [are] being searched and legal travelers [are] being deported back to their origin country,” Freeman said. “That creates a great deal of fear.”

Business profits fall ‘sharply’ amid lost customers

Nationally, small and mid-sized business profits have already “deteriorated sharply” amid the travel slowdown, said Aaron Terrazas, an economist at Gusto, a payroll and benefits provider.
The share of “tourism” companies that are profitable fell to 32% in April 2025, down from 41% and 43% in April 2024 and 2023, respectively, according to Gusto. The category includes tour operators, condo or time-share agencies and ticket or reservation agencies.
The share of profitable “accommodation” businesses fell to 36%, down from 44% and 45%, Gusto found. The category includes small hotels and motels, guesthouses, cottages and cabins, and RV parks and campgrounds.

Tourists visit the Charging Bull of Wall Street in lower Manhattan on March 28, 2025, in New York City.
Spencer Platt | Getty Images News | Getty Images

Slower customer traffic — and lost income — are the main culprits, rather than an increase in expenses from inflation or labor costs, Terrazas said.
The erosion in profitability and revenue is “unusually sharp and unusually sudden, particularly for a time of year when we normally start to see travel pick up,” Terrazas said. “There’s no obvious reason why domestic travel would collapse so sharply and so suddenly in a single month, whereas for international travel there are more obvious explanations.”
The longer the slowdown continues, the greater the odds businesses will be forced to make tough choices and potentially cut staff, Terrazas said.

Foreign visitations to the US are the largest services export in the country and the outlook is quickly souring.

Ryan Sweet
chief U.S. economist at Oxford Economics

Financial losses come at a time when the U.S. hasn’t returned to pre-pandemic levels of travel, further pressuring businesses that rely on tourism, Freeman said. The U.S. welcomed 72 million foreign visitors in 2024, shy of the 78 million in 2019, he said.
While non-residents account for less than 10% of all U.S. tourism demand, they are far more “lucrative” spenders, Freeman said.
The average overseas visitor spends more than $4,000 per person per visit, eight times more than the average American tourist spends domestically, Freeman said. The average Canadian and Mexican tourist spends $1,200 per visit.

‘It’s a community impact’

Less foreign travel will have a disproportionate impact on certain areas.
Las Vegas; Los Angeles; Miami; New York; Orlando, Florida; and San Francisco, for example, account for the largest share of foreign tourists, said Sweet of Oxford Economics.
While New York has a large, diverse economy that can likely absorb a tourism loss without going into recession, the same probably isn’t true of places like Las Vegas or Honolulu, he said.

Tourists take photos near the Las Vegas strip.
Robyn Beck | Afp | Getty Images

“These economies are very, very sensitive to tourism,” said Sweet. “This is their main economic driver.”
So far, Matheny, the co-owner of Adrift Restaurant, has seen monthly sales fall 4% relative to last year — not a “huge” decrease, but a “noticeable” one, she said.
The restaurant has had to cut its buying by an equivalent amount, she said. That in turn hurts the local economy in Anacortes, since the restaurant sources the bulk of its food from local farms and fisheries — hurting their bottom lines, too, said Matheny.
“It’s a community impact,” she said. More

History suggests that President Donald Trump’s new “Too Late” nickname for Fed Chair Jerome Powell has a strong chance of coming true.
Fed leaders have been criticized as slow to act absent compelling data showing them something needs to be done.
Powell is in a no-win situation with threats to both sides of the Fed mandate “and that’s why he’s doing the exact right thing at this moment, which is nothing, because one way or another it’s going to be a mistake,” economist Dan North said.

U.S. Federal Reserve Chair Jerome Powell speaks during a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, D.C., U.S., May 7, 2025.
Kevin Lamarque | Reuters

History suggests that President Donald Trump’s new “Too Late” nickname for Federal Reserve Chair Jerome Powell has a strong chance of coming true, though he’d hardly be alone if it does.
After all, central bank leaders have a long history of being too reluctant to raise or lower interest rates.

Whether it was Arthur Burns keeping rates too low in the face of the stagflation threat during the 1970s, Alan Greenspan not responding quickly enough to the dotcom bubble in the ’90s, or Ben Bernanke’s dismissal of the subprime housing prices as “contained” and not lowering rates prior to the 2008 financial crisis, Fed leaders have long been criticized as slow to act absent compelling data showing them something needs to be done.
So some economists think Powell, faced with a unique set of challenges to the Fed’s twin goals of full employment and low inflation, has a strong chance of wearing the “Too Late” label.
In fact, many of them think nothing is exactly what Powell should do now.
“Historically, go back and look at any Federal Reserve, and I’m going back into the ’70s, the Fed is always late both ways,” said Dan North, senior economist at Allianz Trade North America. “They tend to wait. They want to wait to make sure that they won’t make a mistake, and by the time they do that, usually it is too late. The economy is almost always in recession.”

However, he said that given the volatile policy mix, with Trump’s tariffs threatening both growth and inflation, Powell has little choice but to sit tight absent more clarity.

Powell is in a no-win situation, with threats to both sides of the Fed mandate, “and that’s why he’s doing the exact right thing at this moment, which is nothing, because one way or another it’s going to be a mistake,” North said.
Trump wants a cut
Though Trump said the economy probably will be fine no matter what the Fed does, he has been badgering the central bank lately to cut rates, insisting that inflation has been slayed.
In a Truth Social post after the Fed decision this week to keep rates unchanged, Trump declared that “Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue.” The president declared there is “virtually NO INFLATION,” something that was true for March at least when the Fed’s preferred inflation gauge came in unchanged for the month.
However, the president’s tariffs have yet to be felt in the real economy, as they are barely a month old.
Recent economic data do not indicate price spikes nor a perceptible slowdown in economic activity. However, surveys are showing heightened worries in both the manufacturing and service sectors, while consumer sentiment has soured, and nearly 90% of S&P 500 companies mentioned tariff concerns on their quarterly earnings calls.
At this week’s post-meeting news conference, though, Powell repeatedly voiced confidence in what he called a “solid” economy and a labor market “consistent with maximum employment.”
No ‘pre-emptive’ cuts
The 72-year-old Fed chair also dismissed any idea of a pre-emptive rate cut, despite what sentiment survey data is indicating about current conditions.
“Powell offered two reasons for not being in a hurry. The first – ‘no real cost to waiting’ – is one he may live to regret,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a client note. “The second – ‘we are not sure what the right thing will be’ – makes more sense.”
Powell has his own particular history of being late, with the Fed reluctant to hike when inflation began spiking in 2021. He and his colleagues labeled that episode “transitory,” a call that came back to haunt them when they had to institute a series of historically aggressive hikes that still have not brought inflation back to the central bank’s 2% target.
“If they’re waiting for the labor market to confirm whether they should cut rates, by definition they’re too late,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities and a senior economic advisor to Trump in his first term. “I don’t think the Fed is being forward-looking enough.”
Indeed, if the Fed is using the labor market as a guide, it almost certainly will be behind the curve. An old adage on Wall Street says, “the labor market is the last to know” when a recession is coming, and history has been fairly consistent that job losses generally don’t start until after a downturn has begun.
LaVorgna thinks the Fed is hamstrung by its own history and will miss this call as well, as policymakers unsuccessfully try to game out the impact of tariffs.
“We’re not going to know if it’s too late until it’s too late,” he said. “Economic history combined with current market pricing suggests there’s a real risk the Fed will be too late.” More