Trump’s impulse for the Fed Fed cuts is discussed on the new debate on the central bank’s independence
Former President Donald Trump is increasing the pressure on the Federal Reserve, asking for aggressive interest rate cuts in a movement that has revived the debate on the independence of US monetary policy.
On Monday, Trump published a letter written on social networks addressed to the president of the Fed, Jerome Powell, demanding that the rates be reduced to about 1%. Trump argued that the United States is “losing hundreds of billions” due to what he described as an unnecessarily adjusted monetary policy, qualifying the central bank “one of the easiest works”, and declared that Powell acts.
The audacity demands Trump: 1% of rates in the midst of economic expansion
Trump’s impulse due to a reference rate of 1% is remarkable, especially since such ultra casualties have historically been linked to severe recessions or economic crises. The current federal funds is between 4.25%and 4.50%, a level that the Fed has maintained to combat inflation that remains above its 2%target.
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Analysts warn that, although the lowest rates can stimulate loans, investment and consumer spending, aggressive cuts at this stage, the risk of rekindling inflation pressures, particularly if the economy remains resistant.
“Trump’s proposal is bold, but does not align with the current inflation environment,” said Janet Wu, Edge capital economist. “Fed must balance growth with price stability, and that requires a careful moment.”
Trump’s fed obsession: self-nomination threats
Trump’s campaign for lower rates has become an unusual mixture of public pressure and personal intervention:
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He has threatened to eliminate Powell, despite the lack of authority to fire the Fed chair for political disagreements.
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He has demanded cuts from 100 to 250 basic points during public comments.
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He has joked about himself as a fed chair.
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Now, he has written a direct appeal to Powell, which demands that the rates be reduced to 1%.
Trump has made it clear that low rates are fundamental for its economic agenda as the United States addresses a contentious electoral cycle and, like inflation, remains a key concern among voters.
Fed is still cautious despite political pressure
Despite the growing pressure, the Federal Reserve has shown little inclination to adjust rates immediately. With the inflation that was still around 3% and unemployment in minimum of multiple decades, Fed officials have reiterated their commitment to data -based decisions.
Several Fed officials indicated on Monday at lower rates prematurely, particularly amid the continuous uncertainty linked to commercial policies and rates that could boost more price pressures.
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Powell himself has repeatedly emphasized the importance of maintaining the independence of the Fed, stating that decisions will remain rooted in economic data, not in political agendas.
Transition plans behind the scene
While Trump publicly demands immediate action, discussions about the future of Fed leadership are underway. According to the reports, the secretary of the Treasury, Scott Besent, began preparing for Powell’s expected departure in May 2026.
Although the president cannot rule out Powell for political disagreements, Trump has asked Powell’s resignation, while Besent has indicated a structured transition approach. In a recent Bloomberg TV interview, Besent said that an inauguration of the Fed Board in January could serve as a path for a new leadership, insinuating that a nominated could assume the role of the presidency.
The term of the governor of the Fed, Adriana Kugler, ends in January, making his seat a probable approach to the nomination, with the expected decisions in October or November.
Who could lead the Fed below?
The names that circulate as possible successors include the current governor of the Fed Christopher Waller, who already actively participates in policy discussions, and the former governor of the Fed, Kevin Warsh, who would require the re -election and confirmation of the Senate.
Both figures are seen as pragmatic voices within monetary policy circles, although their position on rates can be aligned more closely with market data than political preference.
Trump vs. pressure Fed resolution
Despite Trump’s vocal campaign, the Fed is expected to maintain stable rates during its next July 30 meeting. According to the CME Fedwatch tool, there is currently a probability of 80.9% that rates remain unchanged, with only 19.1% chance of a cut.
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“The markets are observing closely, but the Fed has been clear that any cut will depend on constant evidence to decelerate inflation and economic cooling,” said Laura Chen, head of Nexus Macro.
September: A turning point for rates cuts?
Market expectations change dramatically when they look at September. Merchants are increasingly priced at a reduction of potential rates at the Fed meeting in September, with the CME Fedwatch tool that shows a 94.8% probability of a reduction if economic conditions justify it.
Even investment banks such as Goldman Sachs, which previously predicted a posterior schedule for rates settings, have reviewed their expectations, now predicting the first rate reduction in September.
“If we see the slowdown and moderate inflation of growth, the Fed could pivot for September, but will be driven by data, not political,” Chen added.
What would the tariff cuts mean for the economy?
If the FED reduces the fees in September, the costs of indebtedness for companies and consumers would potentially increase the expense, investment and feeling of the stock market. It could also weaken the dollar, making US exports more competitive worldwide.
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However, the reduction of rates prematurely risks the reaction of inflation, especially if the labor market remains tight and consumer demand remains stable.
“Fed’s challenge is to balance the risk of overheating against the need to support growth,” Wu said. “Premature cuts could feed another inflation cycle.”
All eyes in summer data
While Trump calls to rates cuts add noise to politics conversation, the Fed is still focused on economic indicators. The next data on inflation, employment and expense of consumers will greatly influence the next steps of the Fed.
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“If inflation shows moderate cooling signs and growth, the Fed can find justification for cuts, aligning with market expectations without seeing that they leaned over political pressure,” Chen said.
Market observers will closely analyze all reports of the Labor Market and Labor Communication of the CPI in the coming weeks, since these could be the key promoters for the Fed decision in September.
Final thoughts
Trump’s public pressure campaign for deep -rate cuts cuts is to rekindle the debate on the independence of US monetary policy and its role in inflation management and growth. While it is unlikely that your 1% rates demand will be met in the short term, conversation about rate cuts is gaining impulse as the markets prepare for possible adjustments at the end of this year.
For now, the Federal Reserve is firm, committed to a “wait and observes” strategy while keeping the focus on hard data, even when Trump continues to place low rates in the center of its economic agenda.
As summer economic data is developed, merchants, companies and policy formulators will have a clearer vision of whether the United States is directed towards a logging environment, or if the Fed resolution will continue to resist political noise in favor of its double stable pricing mandate and the maximum employment.
Writer
@Ellena
Ellena is an experienced cryptographic writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides information about the latest trends and innovations in the currency space.
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