In the Politico Morning Money piece, “Why Jay Powell Can’t Give Trump What He Wants” (published July 30, 2025), the discussion opens up the real issues and connections between interest rates and monetary policy. Maybe the banks are just playing to the elasticity of market demand. In other words, as long as the consumers will pay high rates, we’ll charge them, despite the fed.
1. Trump’s aggressive push for lower rates
President Trump has repeatedly demanded that Fed Chair Jerome Powell enact aggressive interest rate cuts—calling for reductions as steep as 3 percentage points—in hopes of stimulating economic growth and lowering debt costs.
2. Constraints of Fed independence
The Federal Reserve’s structure prevents the Chair from unilaterally adjusting rates. Decisions are made collectively via the Federal Open Market Committee (FOMC), which insulates monetary policy from direct political pressure.
3. Economic risks of premature cuts
Slashing rates too quickly could backfire—boosting inflation as too much liquidity enters the system. Powell has warned that such moves could actually undermine investor confidence and destabilize markets.
4. Data doesn’t support a cut just yet
The Fed recently maintained its target range at 4.25%–4.50% for the fifth straight meeting. Inflation (e.g. core PCE at roughly 2.6–2.7%) remains above the 2% target, job market indicators show lingering strength, and trade-policy–driven uncertainty persists. Internal dissents from Governors Michelle Bowman and Christopher Waller (Trump appointees) expressed concerns—but they favored modest cuts, not the deep ones Trump advocates.
5. Powell’s rebuttal and legal protection
Powell has publicly reaffirmed the Fed’s commitment to independence and data‑based decision‑making. Legal experts emphasize that the President cannot fire a sitting Fed Chair without cause. Powell’s term expires in May 2026. While speculation swirls over “for cause” removal tied to cost overruns at the Fed’s $2.5 billion renovation, experts doubt such moves would succeed.
Takeaways
1. Independence isn’t negotiable. Trump’s demands collide with the Fed’s institutional barriers and legal protection for the Chair.
2. Markets expect moderation, not a slashing spree. Investors now anticipate only modest cuts, possibly starting in September—not a dramatic rate reset.
3. Economic fundamentals matter more than political will. Powell remains cautious, citing inflation and tariff‑related uncertainty—reflective of a central bank that takes its data mandate seriously.
4. Threats may backfire. Political pressure, including proposals to fire Powell, risks undermining confidence in the Fed and could raise, not lower, long‑term borrowing costs.
5. Power shift won’t come overnight. If Trump waits until 2026 and appoints a new, Senate‑confirmed Chair, he still won’t guarantee the quick rate cuts he desires. The Fed’s culture and structure will still demand restraint.
Summary
Trump continues to demand swift, deep rate cuts—while Powell holds firm. Yet, structural independence, legal limits on firing, persistent inflation, and risk of destabilizing markets all constrain the chances of giving Trump exactly what he wants. The Politico article argues that Powell’s restraint isn’t just policy—it’s design.
