Fed Likely to Hold Rates Steady as Trump Pressures Powell for Cuts

The Fed interest rate decision 2025 is expected to leave rates unchanged this week, highlighting the growing divide between Federal Reserve Chair Jerome Powell and President Donald Trump. If confirmed, this would mark the fifth consecutive meeting without a rate change, keeping the Fed’s short-term rate at around 4.3%.

Trump-Powell Tensions at New High

Trump continues to demand rate cuts, claiming the U.S. economy is strong enough to justify them. Powell and most Fed officials disagree. They argue that solid growth warrants higher rates to prevent inflation from overheating.

“I’d argue that our interest rates are higher because our economy’s doing fairly well, not in spite of it,” said Gennadiy Goldberg of TD Securities.

Trump blames Powell for high borrowing costs, saying the Fed is costing taxpayers billions. However, the Fed maintains its role is to manage inflation, not to ease government debt burdens.

Internal link: What is the Fed’s mandate and how does it affect rates?

Fed Officials Push Back on Political Pressure

Trump’s recent public criticisms include attacks on the Fed’s $3.1 billion renovation costs, which he claimed were inflated. During a visit to the Fed on July 24, he confronted Powell on camera over the spending.

Despite political pressure, most economists expect the Fed to hold steady until at least September. Some members—like Trump-appointed governors Christopher Waller and Michelle Bowman—are pushing for a cut. If they dissent on Wednesday, it would be the first dual dissent since 1993.

“The economy is still growing, but its momentum has slowed significantly,” Waller said this month, citing job market concerns.

Inflation and Outlook: Fed Stays Cautious

Inflation rose to 2.7% in June, up from 2.4% in May, exceeding the Fed’s 2% target. Core inflation also ticked up. Although inflation fell sharply in 2023, many Fed members want to ensure that recent tariffs don’t reignite price hikes before acting.

Trump argues inflation is no longer a threat, but Powell insists a cautious approach is best.

“An ‘actively patient’ approach to monetary policy remains appropriate at this time,” said Susan Collins, president of the Boston Fed.

Trump’s Rate Cut Goals Unlikely

Trump wants rates slashed to 1%. The Fed’s projections show just two cuts in 2025 and one more in 2026, keeping rates near 3.6% through next year. Wall Street agrees, pricing in only two cuts this year, according to CME FedWatch Tool.

Powell’s term ends in May 2026, and even if Trump wins re-election, current Fed members are unlikely to support aggressive cuts.