President Donald Trump stunned reporters on Sunday night when he praised the Federal Reserve’s decision to hit pause on its rate cuts. “I’m not surprised,” he said as he arrived in Washington aboard Air Force One. “Holding the rates at this point was the right thing to do.”
Now this is a complete 180 for a man who spent much of the past year relentlessly demanding that the Fed cut rates immediately. During his second day back in office, Trump flatout said he was gonna force chair Jerome Powell into cutting rates one way or another.
Ignoring him as per usual, the Federal Open Market Committee (FOMC) last week voted unanimously to hold the federal funds rate between 4.25% and 4.5%. The decision came amid fears that inflation could spike again, driven by Trump’s own economic policies, including the tariffs he just launched and of course the immigration crackdowns.
Still, Mr. Trump continues to push his economic agenda. At the World Economic Forum in Davos, Switzerland, just days before the Fed’s decision, he told global leaders that the U.S. economy needed lower interest rates to stay competitive.
“If I disagree [with the Fed’s decision], I will let it be known,” he told reporters from the Oval on Thursday, targeting Fed Chair Jerome Powell directly, who by the way said he had absolutely no comments about the president at his post-minutes press conference, as Cryptopolitan reported.
Trump’s incoming trade wars keep pressure on inflation
February 1st saw chaos as the S&P 500 hit an all-time high before investors began bracing for possible fallout from rising prices. The tariffs are creating bottlenecks and adding costs for companies that rely on foreign goods as well as innocent Americans, pushing inflation higher.
Wall Street is so mad at Trump right now. Investors know that if inflation doesn’t cool soon, it will certainly block further growth. The personal consumption expenditures (PCE) price index, a key measure of inflation, jumped to 2.6% in December from 2.4% in November, according to the U.S. Commerce Department.
Core PCE, which strips out food and energy costs, remained steady at 2.8%—still above the Fed’s 2% target. The Fed’s rate cut pause is meant to give policymakers time to see if inflation finally starts declining.
Powell holds his ground anyway
Powell, who has been a consistent target of Trump’s public outlash, made it clear that the central bank won’t base its decisions on political interference. The Fed cut rates three times in late 2024 when they saw it fit to, and are now holding because they see it fit to, according to chair Powell.
But Trump believes that: “I think I know interest rates much better than they do.” Trump even said during his campaign in August that the president should have a direct say in monetary policy. While this idea has been dismissed by economists and even his own people as risky, Trump continues to hint at changes that could give him more influence over the Fed’s decisions.
Asked whether he believed Powell would listen to him, Trump snickered before giving a condescending “Yeah.” The confidence is typical of Trump, but Powell’s past actions suggest otherwise. The Fed chief has resisted political pressure before, and he’s doing it again, with no fear at all.
But despite their differences, Powell and Trump do agree on one thing: the need for a stable U.S. economy. But their approaches couldn’t be more different. Trump wants rapid rate cuts to keep borrowing cheap and markets booming. Powell, on the other hand, is focused on keeping inflation under control without triggering a recession.
The January pause could be temporary. If inflation shows signs of cooling, the Fed might consider more rate cuts later this year. But for now, Powell is playing it safe, and Trump—in spite of himself—seems to be on board.
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