Whether US President Donald Trump can bend America’s central bank to his will has been a subject of feverish global speculation. The Federal Reserve has autonomy, of course and, as its current chairperson Jerome Powell mentioned in a recent media interface, the White House cannot fire him under the law before his term ends in 2026.
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In public statements, Trump has made it amply clear that he wants monetary policy to ease. While the Fed did cut the federal funds rate several times last year, its moves in 2025 needn’t follow the same slope, given the inflationary impulses embedded in Trump’s policy approach to trade and immigration, apart from the uncertainty of venturing into uncharted zones. On the eve of the Fed’s January rate call, it seemed inclined to make no change.
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With America’s labour market holding up and inflation not entirely quelled, implying the risk of price flickers turning into flares, this is a stance that can be defended on economic logic. A Fed target range of 4.25-4.50% would also conform with bond market expectations, as seen by analysts in prices (and yields). Whether or not Powell announces a rate cut, dramatic days may lie ahead.
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