Fed Cuts Rates Amid Trump Pressure as Economic Tensions Rise in 2025

The US Federal Reserve has reduced its benchmark interest rate for the first time in 2025 marking a pivotal moment for global markets and US economic policy. The quarter point cut to a range of 4 to 4.25 per cent follows an intense campaign from President Trump pushing for faster monetary easing to support what he describes as a stalling economy. This move comes after months of mounting pressure on the central bank to act decisively in the face of slowing job growth and stubbornly elevated inflation.

The Federal Open Market Committee voted decisively in favour of the rate reduction with only one dissenter Stephen Miran a newly installed Trump ally on the board who called for a much steeper half a percentage point cut. While the Fed refrained from the larger move Miran advocated his stance highlighted the growing political influence the White House seeks to exert over the monetary authority. Market watchers had anticipated the 0.25 percentage point cut but the near-unanimity of the Fed’s decision was a reassuring signal for investors concerned about political upheaval within the central bank.

Fresh projections from the committee signal the likelihood of two further rate cuts before the end of the year suggesting policymakers expect economic conditions to remain challenging. The inflation forecast for 2026 has also been revised upwards reaching an average of 2.6 per cent—substantially above the Fed’s stated target of 2 per cent. While the unemployment rate has edged slightly higher it remains historically low yet the risk of deterioration in the labour market looms large for monetary authorities confronted with negative jobs growth reported in June and revised figures sharply downgrading previous employment estimates.

Global markets reacted sharply to the Fed’s announcement. Yields on government bonds fell as investors bet on prolonged monetary support pushing the two year Treasury yield down to 3.46 per cent. The US dollar reversed initial gains in foreign exchange trading while gold soared to an all time high above 3700 dollars per ounce. On Wall Street equities slipped into the red as concerns about future economic momentum and the uncertain path for interest rates weighed on sentiment.

For the Fed maintaining its independence remains a critical concern as Trump continues to publicly call for deeper and more frequent rate cuts. Jerome Powell the chairman stressed in his post meeting press conference that policy decisions remain rooted in economic data rather than political demands. He acknowledged though that heightened tariffs and the administration’s aggressive deportation policies are adding complexity to the outlook with evidence that inflation pressures are being fuelled by higher import costs and weaker employment growth.

Looking ahead debate inside the Fed appears likely to intensify. Six committee members are already resistant to additional cuts warning that inflation may accelerate if easing proceeds too quickly. Stephen Miran’s appointment—temporary for now—adds a new dynamic to the board as Trump eyes further appointments including a potential replacement for Chair Powell next year. With the economic and political landscape shifting dramatically investors and businesses face a period of exceptional uncertainty as the struggle for control over US monetary policy escalates.