Trade War, Inflation... But No Rate Cuts In Sight

The Federal Reserve is delaying. It has kept its rates between 4.25% and 4.50% since December. But Donald Trump no longer wants to wait. He demands an immediate cut. For him, tariffs are enough to strengthen the economy. The Fed, however, wants to step back. Result: a tense tug of war between monetary independence and presidential will. The Fed meeting scheduled for this week promises to be electric. The markets, meanwhile, are holding their breath.

Trump vs Powell: an open war

Donald Trump, the president and bitcoin enthusiast, does not like waiting. Even less so when it comes from Jerome Powell, the head of the Fed. Since his return to the White House, he has been pounding his fist. He wants lower rates.

“No inflation, the FED should cut its rate“, he wrote on Truth Social.

Powell remains stoic. He repeats that the Fed acts based on data, not presidential moods. But the president keeps piling on attacks.

Powell is always TOO SLOW AND TOO BAD.

Behind the scenes, some even mention his impeachment. Yet, Powell is his own choice. To appoint, then want to fire: Trump remains true to his disruptive logic. The context is special.

Inflation has slowed but stagnates at 2.4%. Unemployment is rising, markets are agitated. And Trump wants to revive at all costs. For him, the remedy is simple: cut rates, like in Europe.

Tariffs that change the game

But the Fed does not follow. For good reason. The tariffs imposed by Trump complicate things. 145% on Chinese products. At least 10% on all imports. Even cocoa is over-taxed. The goal? Reindustrialize America and fill the coffers. But the immediate result is a price increase. And tension on consumption.

Loretta Mester, former Fed of Cleveland, warns:

Tariffs will at least slow growth.

The risk of stagflation is settling in. Sluggish growth. Imported inflation. Fragile jobs. Belinda Roman adds:

If the Fed cuts rates now, markets will think it is panicking.

And if markets panic, everything can deteriorate very quickly. The Fed hesitates, so it delays. Powell even quotes Ferris Bueller: “life moves pretty fast“.

A wink, perhaps. Certainly a metaphor. We must observe, he says. Not rush decisions. But Trump, he charges ahead.

Figures in hand, the duel continues

The economic terrain is not reassuring. Unemployment rising to 4.2%. Record layoffs in April. Inflation steady at 2.4%, far from the 2022 peak, but still uncomfortable. Consumer confidence collapses. The expectations index is at 54.4, a threshold for imminent recession.

Faced with these figures, Trump wants to act. Powell wants to wait. The disagreement becomes public.

Here are the key figures of the moment:

• 4.25% to 4.50%: current rates maintained since December;
• 145%: tariff imposed on Chinese products;
• 105,400: layoffs recorded in April, a post-Covid record;
• 54.4: confidence index, lowest since 2011;
• 2.4%: inflation in March, stable since September.

For Trump, these signals demand an immediate response. For the Fed, they are reasons for caution, not action. This mismatch fuels tensions. And speculation grows. Rate cut or status quo? Both camps hold their positions.

Donald Trump long dreamed of firing Jerome Powell. And he never misses an opportunity to remind everyone of this desire. Pressure is mounting. But will the Fed hold course in the face of this political offensive?