Fed Expected to Hold Rates Steady, Exposing Rift Between Powell and Trump

Fed Prepares for Fifth Consecutive Rate Hold

The Federal Reserve is widely anticipated to keep its short‑term interest rate unchanged Wednesday, marking its fifth straight meeting without adjustment. This pause underscores the growing tension between Fed Chair Jerome Powell, who prioritizes inflation control, and President Donald Trump, who has publicly demanded lower rates to bolster economic growth.

“I’d argue our rates are higher because our economy is strong, not despite it,” said Gennadiy Goldberg, U.S. rates strategist at TD Securities. Yet Trump insists a solid economy warrants cheaper borrowing, likening the U.S. to a blue‑chip stock that should enjoy rock‑bottom rates.

Dissent Looms on Fed Board

Even as Powell readies to defend a steady rate, two of the Fed’s seven governors—both Trump appointees—are rumored to be considering a dissent, favoring an immediate rate cut. Should both vote no, it would mark the first dual dissent since 1993, revealing fractures within the central bank itself.

Most Fed officials remain wary of cutting rates too soon. William English, former Fed staffer and Yale economist, warns that easing policy prematurely risks reigniting inflation: “Using monetary policy to ease pressure on fiscal authorities points to higher inflation and bigger problems down the road.”

Trump’s Criticism Intensifies

President Trump, whose term runs until January 2025, has waged a relentless campaign against Powell. He argues that the Fed’s inaction has saddled taxpayers with hundreds of billions in extra interest on Treasury debt. “There’s no inflation,” Trump tweeted recently, demanding the Fed slash its benchmark rate from the current 4.3%.

Economists counter that inflation, while down from its 2022 peak, remains above target, and recent upticks—partly driven by tariffs—justify caution. Markets, too, expect only modest rate cuts later this year, not the deep reductions Trump wants.

Beyond Rates: A Battle Over Fed’s Independence

The rate decision is only one front in a broader struggle over the Fed’s role. This week, Trump surprised many by touring the Fed’s $2.5 billion renovation project, pressing Powell on ballooning costs. Administration officials have floated the idea of firing Powell—though by law, removal requires proof of misconduct, not mere disagreement over policy.

Mark Spindel, author on central bank independence, sees a bigger fight: “Powell’s challenge goes beyond rate cuts. He’s defending the Fed as an institution against political attacks that threaten its very existence.”

Market Reactions and Outlook

Wall Street will watch Wednesday’s announcement closely. A clear hold—paired with any signal on timing of future cuts—will shape borrowing costs for mortgages, car loans, and business credit. If investors believe the Fed is caving to political pressure, bond yields could rise, pushing long‑term rates higher.

Still, most expect only a modest policy shift. Fed futures price in a roughly half‑point of easing by year‑end, reflecting officials’ caution about inflation’s resilience.

The Road Ahead for Powell and Trump

With Powell’s term ending in May 2026, Washington’s pressure campaign shows no signs of letting up. Potential successors are already being floated, and Powell’s independence is under unprecedented scrutiny. Trump, meanwhile, continues to lambaste the Fed at rallies and on social media, cementing his view that cheaper credit is key to his economic vision.

For now, Wednesday’s meeting will demonstrate whether the Fed can withstand political winds or yield to calls for immediate relief. Regardless of the outcome, the gulf between Powell’s inflation‑fighting mandate and Trump’s growth‑at‑all‑costs stance is likely to define U.S. monetary policy battles for years to come.

— Reported by Orbital News

Image: White House

Image: White House

Image: White House