Why Isn’t Powell Cutting Rates? Trump’s 17 Demands and the Fed’s Cold Calculus

The Great Rate Duel: Trump vs. the Fed

In June 2025, Donald Trump didn’t just urge; he orchestrated a public campaign against Federal Reserve Chair Jerome Powell. On social media platforms like Truth Social, he called Powell “Too Late先生”—a nickname that stuck like gum on a shoe—and demanded immediate cuts of 200 to 300 basis points.

He wasn’t alone in his frustration. But here’s what most headlines miss: this isn’t just political theater. It’s a clash between short-term optics and long-term economic physics.

Why Trump Wants Immediate Cuts

Let me be clear: I respect data-driven policy—but I also understand political incentives.

Trump wants lower rates for three key reasons:

• To offset tariff fallout: His own trade policies raised import costs. Lower interest rates could soften inflationary pressure from those tariffs.
• To slash debt servicing: U.S. interest spending hit \(776 billion in just eight months—a record high since the 1990s. He argues cutting rates by 2% saves \)80 billion annually—though economists warn it might backfire.
• To boost stocks & re-election momentum: A falling rate environment fuels asset prices. And when markets rise, voters notice—even if they don’t understand why.

It’s not irrational—it’s strategic. But is it wise?

Why Powell Won’t Budge (Yet)

I’ve watched central banks through three cycles now—from Bitcoin crashes to pandemic liquidity floods—and let me tell you: Powell isn’t playing games with data.

Despite GDP contracting by 0.3% in Q1 2025, unemployment remains at a tight 4.5%. Hourly wages are still rising at over 4%. Consumer spending and business investment persist around +1.5% to +2% growth.

That’s not recession terrain—it’s ‘slow-cooking’ resilience.

Powell said it best: “We see some cooling in labor markets… but not enough to justify action.”

His real concern? Data reliability under uncertainty—and whether easing too early could reignite inflation risks once global supply chains stabilize again.

This isn’t stubbornness—it’s prudence disguised as delay.

The Market Consensus: September or December?

Even among Fed watchers, there’s divergence—but consensus is forming:

• Citi moved expectations from July → September.
• Jamie Cox (Harris Financial) predicts July restarts cuts if employment trends weaken further.
• The market now prices two rate cuts by year-end—at least one in September and another in December—with no major shifts before then.”

The point isn’t if they’ll cut—but when, based on hard evidence—not tweets or outrage logs.

The Hidden Risk No One Talks About: Debt Demand Collapse

The biggest danger of premature cuts? A self-inflicted wound on Treasury yields. If Congress continues fiscal profligacy while rates drop too fast, demand for U.S. bonds may fall—even as supply soars—which pushes yields up anyway—increasing debt costs despite lower policy rates! The irony? Cutting rates to save money might actually cost more later—inflationary feedback loops aside.