Fed Faces Trump Criticism Amid Rate Freeze Decision/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Federal Reserve is expected to keep interest rates unchanged for a fifth straight meeting, deepening tensions with President Trump, who’s demanding aggressive cuts. Fed Chair Jerome Powell remains cautious, citing inflation risks and a solid job market, while Trump insists lower rates are needed now. Internal dissent is growing, with two Trump-appointed governors possibly voting for cuts.
Federal Reserve Rate Decision + Quick Looks
- Fed likely to hold rates steady at 4.3% for fifth meeting in a row
- Trump calls for aggressive cuts, slamming Powell over delays
- Two Trump-appointed Fed governors may dissent and vote for a rate cut
- Inflation at 2.7%, up from 2.4% in May, above Fed’s 2% target
- Fed officials project only two cuts this year, versus Trump’s push for 1%
- Trump claims “no inflation”, contradicting official data
- Powell signals caution over tariff-driven inflation risks
- Fed’s dual mandate: stable prices, full employment
- Wall Street pricing in two cuts by end of 2025
- Internal Fed conflict shows governance strains under political pressure
Deep Look: Fed Holds Firm as Trump Pressures for Deep Rate Cuts
WASHINGTON (AP) — The Federal Reserve is expected to keep its benchmark interest rate unchanged this week, defying escalating pressure from President Donald Trump and signaling a widening rift between Chair Jerome Powell and the White House on the future of U.S. economic policy.
If the Fed holds steady as anticipated, it will mark the fifth consecutive meeting without a rate adjustment, maintaining the current short-term rate at around 4.3%. This move, while consistent with Powell’s cautious approach, clashes sharply with Trump’s demand for aggressive rate cuts — down to 1% — to stimulate economic growth.
Divergent Economic Philosophies
President Trump argues that the Fed should lower borrowing costs as a reward for America’s economic strength. His analogy frames the U.S. economy as a financially stable entity — deserving of low interest rates akin to a “blue-chip” corporation.
However, economists and Fed officials view it differently: A strong economy typically warrants higher interest rates to prevent inflation and overheating.
“Our rates are higher because the economy’s doing fairly well, not in spite of it,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.
Trump vs. Powell: A Deepening Divide
Tensions between Trump and Powell are intensifying, especially with the Fed’s longer-term outlook remaining cautious. Projections released in June showed officials expecting just two cuts in 2025, and only one in 2026. Trump, in contrast, wants the rate down to 1% — a shift Powell and others deem unrealistic.
The Fed’s independence is at stake. Trump recently criticized Powell not just on policy, but over the cost of renovating the Fed’s buildings. During a confrontational site visit, Trump berated Powell on-camera, prompting speculation about whether Trump may attempt to remove Powell before his term ends in May 2026.
Internal Dissent Grows Within the Fed
Adding to the drama, two Trump-appointed governors, Christopher Waller and Michelle Bowman, may dissent during this week’s meeting by voting for a rate cut. If both break ranks, it would be the first time in over 30 years that two Fed governors vote against the chair — underscoring how deep the internal policy rift has become.
Waller supports a cut, but for reasons distinct from Trump’s. “The economy is still growing, but its momentum has slowed significantly,” Waller warned, citing rising unemployment risks rather than political considerations.
Inflation Still a Concern
Despite Trump’s insistence that there is “no inflation,” government data shows otherwise. Inflation ticked up to 2.7% in June, from 2.4% in May, exceeding the Fed’s 2% target. Core inflation, excluding food and energy, also rose to 2.9%.
Fed officials are concerned about tariffs re-igniting inflation, especially if Trump’s trade policies persist. That uncertainty is a key reason behind Powell’s wait-and-see strategy, which he describes as “actively patient.”
Why the Fed Isn’t Cutting — Yet
Economists argue that cutting rates too soon would undermine one of the Fed’s primary missions: maintaining price stability. Former senior Fed economist William English noted that easing monetary policy to reduce government interest payments would “point to higher inflation and bigger problems down the road.”
Fed leaders worry that if investors sense political interference in interest rate decisions, it could lead to rising yields on Treasury bonds, pushing up borrowing costs across the economy — the very outcome Trump seeks to avoid.
Outlook: September Cut Possible, But Limited
While some economists forecast a possible quarter-point cut in September, many say the two-month delay won’t affect the broader economy. Wall Street, according to CME’s FedWatch tool, is currently pricing in two rate cuts by year-end — far from Trump’s more radical vision.
Boston Fed President Susan Collins summed up the Fed’s approach: “Continued solid economic conditions enable the Fed to take time to carefully assess incoming data.”
In short, the gulf between Trump’s economic urgency and Powell’s institutional caution remains vast — and likely to persist well into 2026.
