Why the Fed won’t comply with Trump’s wishes even if it lowers rates this week

It was in December 2024 that the Fed decided on its last rate cut. Since then, the central bank has kept interest rates unchanged in its 4.25% to 4.5% range. But this Wednesday all signs point to it being time for another downgrade, and US President Donald Trump is pinning his hopes on a"big cut" happening.

What all forecasts point to is central bank governors easing monetary policy for the first time in nine months. The doubt is more on the magnitude of the rate cut."I think there will be a big cut," Trump told reporters Sunday on his way back to Washington.

"It's perfect for cutting," the White House tenant expressed. However, even though a rate cut is all but assured, Trump's preferences may not be realized. The average estimate of a Bloomberg survey of economists is for a reduction of 25 basis points, not 50 basis points, in view of the current uncertainty.

According to the US agency, some central bankers are still urging caution about acting too quickly, despite continued pressure from Trump to lower rates. US inflation still remains above the Fed's 2% target and could rise further if tariffs imposed by the president increase costs.

Also, recent weak economic reports raise concerns that the labor market could slip into a deeper slowdown, threatening consumer spending and growth. All this amid tension over the Fed's future mandate.

Jerome Powell' s leadership at the central bank comes to an end next May 2026, and Trump can't wait to find a replacement, after numerous insults to Powell over his stewardship. Among the candidates, the president has publicly mentioned White House economic advisor Kevin Hassett, Fed Governor Christopher Waller, and former Fed Governor Kevin Warsh as three of the leading candidates.

It was in December 2024 that the Fed decided on its last rate cut. Since then, the central bank has kept interest rates unchanged in its 4.25% to 4.5% range. But this Wednesday all signs point to it being time for a further cut, and US President Donald Trump is pinning his hopes on a"big cut" happening.