All Eyes on the Fed as Trump Turns Up the Heat
- President Trump and his allies have been ramping up pressure on Fed Chair Powell.
- Despite the escalating pressure campaign, markets aren’t expecting the Fed to budge just yet.
It’s Fed week. On Wednesday, July 30, the Federal Open Market Committee will announce its latest monetary policy decision, and this one is shaping up to be one of the most politically charged in recent memory.
President Donald Trump and his allies have been ramping up pressure on Federal Reserve Chair Jerome Powell to cut interest rates, accusing him of keeping borrowing costs too high. Trump has even floated the idea of firing Powell—though legal experts say that may not be within his authority. By law, the Fed chair can only be removed “for cause.”
Still, Trump and his team are reportedly exploring whether Powell’s management of a Fed building renovation could qualify. Last week, Trump visited the Federal Reserve—marking the first time a sitting president has done so in nearly 20 years—to tour the construction site and publicly air concerns about the project’s cost overruns.
Tension Rises Between Trump & Powell
Tensions between Trump and Powell were on full display during the televised visit. Trump suggested the project was bloated and over budget. Powell pushed back. The encounter ended with Trump saying he didn’t think it was “necessary” to fire Powell but added he hoped the Fed chair would “do the right thing” by cutting rates.
Target Rate Probabilities
Source: CME Group FedWatch Tool
Despite the escalating pressure campaign, markets aren’t expecting the Fed to budge just yet. Fed funds futures are pricing in a 97% chance that the central bank holds the fed funds rate steady at 4.25% to 4.5%, a level it's maintained since December.
But the outlook grows murkier beyond this week. Futures imply a 62% chance of a rate cut at the Fed’s next meeting in September and another likely cut in December—for a total of two cuts by year-end.
Whether those cuts materialize will likely depend more on data than political rhetoric. Inflation has remained sticky, and while President Trump’s tariffs haven’t yet caused a broad surge in consumer prices, economists caution that the effects could show up with a lag. Meanwhile, job growth has slowed but remains positive, giving the Fed breathing room to stay patient.
Still, the political heat is increasing. Trump has made it clear he doesn’t want the Fed to wait much longer. Powell will be under the spotlight on Wednesday, and investors will be watching closely to see how he navigates the growing pressure.
