Trump Is Demanding Interest Rate Cuts. Will The Fed Listen As It Meets This Week?

The Federal Reserve is meeting this week to discuss U.S. interest rates and there is one big voice calling for cuts.

Last week, President Donald Trump said he would "demand" that interest rates drop immediately.

His comments, via video link, to the World Economic Forum in Davos, Switzerland were pointed at Federal Reserve Chair Jerome Powell.

Powell likely had different plans for potential rate cuts. The Fed is expected to announce a pause in rate cuts on Wednesday afternoon.

The Fed cut its key lending rate by a full percentage point in the last four months of 2024 but indicated it would move more cautiously in the future.

Policymakers are concerned about inflation remaining elevated above the Fed's long-term target of two percent.

"I think that a slower pace of cuts really reflects both the higher inflation readings we've had this year and the expectations that inflation will be higher" in 2025," he said last month. "We're closer to the neutral rate, which is another reason to be cautious about further moves."

There are also concerns that tariffs threatened by Trump could lead to higher inflation.

Trump often clashed with Powell over fiscal policy during his first term and resumed attacks since being sworn back into office.

"I think I know interest rates much better than they do," Trump said of the Fed. "And I think I know certainly much better than the one who's primarily in charge of making that decision."

The Federal Reserve has a dual mandate from Congress to act independently to tackle inflation and unemployment.

The Federal Funds Rate now sits at 4.25-4.505%. The Fed projected that there will only be two interest rate cuts in 2025 after its December meeting.