The Federal Reserve is staying firm on its rate policy and not even Donald Trump’s demands for cheaper borrowing are swaying them yet.
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With just days to go before the Fed’s July 29–30 meeting, investors are bracing for disappointment. Despite Trump’s very public frustration with the central bank, the Fed looks set to hold rates steady. Inflation has started rising again, and Federal Reserve officials say the recent data is not strong enough to justify cutting interest rates yet.
In recent weeks, Trump has called more aggressively for interest rate cuts, blaming high borrowing costs for weighing down growth and worsening the federal deficit. At one point this week, insiders said he even flirted with the idea of firing Fed Chair Jerome Powell. That talk alone spooked markets and sent Treasury yields climbing.
Powell stayed silent, and so did most of his colleagues.
Inflation Is the Real Boss
Data from June showed that inflation is not cooling fast enough to justify looser policy. Prices for goods and services, especially those hit by recent tariffs, are rising again. That’s giving the Fed every excuse it needs to wait. Core inflation ticked up slightly, and consumer spending, while softening, hasn’t crashed.
In short, the economy is still moving, and the Fed sees no reason to risk reigniting inflation by cutting too soon.
That has created a standoff. Trump wants cheaper money to fund his growing federal budget and to stimulate pre-election momentum. But the Fed remains committed to its dual mandate, maximum employment and price stability, not campaign timelines.
Markets Brace for More Tension
The fallout from Trump’s threats wasn’t minor. Markets briefly wobbled as speculation grew that he might try to replace Powell, but Wall Street soon snapped back. Investors know that removing the Fed Chair would unleash chaos, and even Trump seems to understand the risks.
Still, the tension adds uncertainty. Powell may be secure for now, but if inflation continues to edge higher, and Trump keeps pressing for cuts, the Fed will be walking a very fine line.
For now, the Fed doesn’t seem convinced the economy is ready for a rate cut. Investors are still betting on a possible move later this year, but July is looking increasingly unlikely.
And if inflation doesn’t behave, then cuts may not come at all.
Investors can track the latest inflation rate data on TipRanks. Click on the image below to find out more.
