Powell Stands Firm: Why the Fed Is Holding Back Rate Cuts Despite Market Pressure and Trump’s Outrage

As financial markets celebrated a surprising rally on June 24, 2025, one question loomed large: Why isn’t the Federal Reserve cutting interest rates? Despite vocal pressure from Wall Street, the business community, and former President Donald Trump, Federal Reserve Chair Jerome Powell delivered a message of caution and patience in his testimony before Congress today.

Instead of hinting at policy changes, Powell offered a measured and, some might say, defiant stance that drew comparisons to the Fed’s missteps during the 1970s inflation era. His position sent a clear signal: the central bank will not risk its credibility by acting too soon.

Source: X

Powell’s Message to Congress: No Rush, No Panic

Testifying before lawmakers, Powell emphasized that while inflation has cooled compared to its peaks, it remains “somewhat elevated”—not yet low enough to justify immediate rate cuts. According to commentary shared by The Kobeissi Letter, Powell stated the Federal Reserve is “well-positioned to wait and see,” citing key factors:

• Inflation progress is real but fragile

• New tariffs could fuel price increases

• The U.S. labor market remains strong, supporting steady consumption

This calm and steady approach underlines Powell’s determination not to repeat past mistakes. The message: The Fed will only act when data—not political pressure or market anxiety—supports a move.

Trump’s Fury: Calls Powell “Hardheaded” and “Dumb”

The restraint shown by Powell has not gone unnoticed by critics, particularly Donald Trump. In a fiery post on X, the former president lambasted Powell, accusing him of “incompetence” and claiming that the U.S. economy is suffering under unnecessarily high interest rates.

Source: X

“Europe has cut rates 10 times while we’ve done nothing. Rates should be 2–3% lower,” Trump argued, estimating that lower borrowing costs could save the nation $800 billion annually. He went further, suggesting Congress should consider replacing Powell—an idea that stoked new rumors about a potential effort to remove the Fed chair.

The Shadow of the 1970s: Why Powell Is Wary of Cutting Rates

Powell’s reluctance to lower rates is rooted in history. The 1970s serve as a cautionary tale, when the Federal Reserve cut rates prematurely during a period of declining inflation, only to see price pressures roar back with a vengeance. That misstep contributed to a decade of stagflation—a toxic mix of high inflation and weak growth.

Today’s economic indicators offer a complex picture. On one hand, the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, shows a cooling trend. On the other, data like ISM Services Pricing, which reflects how businesses plan to price goods and services, suggests that upward price pressures could soon return.

Powell’s takeaway: Cutting rates now could reignite inflation just as it’s showing signs of retreating. His cautious stance is designed to avoid repeating the errors of that turbulent era.

Inside the Fed: A Divided Committee, But Consensus to Wait

Interest rate decisions at the Fed are made by a 19-member Federal Open Market Committee (FOMC). Current projections show a divided house:

• 7 members expect no cuts in 2025

• 2 members foresee a single cut

• 10 members predict at least two cuts by year-end

Market indicators reflect this uncertainty. According to the CNE FedWatch Tool, there is currently only a 20% probability of a rate cut at the July FOMC meeting. This aligns with Powell’s cautious tone and suggests that traders should temper expectations of near-term relief.

Markets Rally Anyway: Betting on the Future

Interestingly, even without the promise of immediate rate cuts, markets reacted positively today. Major indexes climbed, and cryptocurrencies like Bitcoin and Ethereum saw price gains. The crypto sector surged more than 4%, with the total market capitalization reaching $3.25 trillion.

Why the optimism? Investors may be encouraged by Powell’s clarity. A predictable Fed, even if cautious, can provide a sense of stability. Additionally, traders appear to be front-running the future, betting that rate cuts will eventually come once inflation convincingly falls.

What This Means for Borrowers and Businesses

For consumers and companies, the Fed’s stance means that borrowing costs will stay elevated for now. Mortgage rates, credit card APRs, and business loan rates are unlikely to decline until the Fed shifts policy—something that probably won’t happen before late 2025 or early 2026 unless inflation data improves significantly.

Source: X

That said, Powell’s approach offers a silver lining. By prioritizing inflation control, the Fed aims to ensure that when rates do fall, the recovery will be more sustainable and less vulnerable to renewed price spikes.

The Political Storm Ahead

Powell’s strategy may be grounded in economic data, but it places him in the crosshairs of political figures like Trump who are eager for looser monetary policy. With the 2026 presidential race already casting its shadow, Powell could face growing pressure to justify his decisions as candidates debate the direction of U.S. economic policy.

Still, Powell’s testimony made clear that he is listening to the numbers, not the noise. In his view, protecting the Fed’s hard-won credibility is more important than responding to short-term political demands.

Final Word: The Fed’s Path Forward

So, why is the Fed not cutting rates? Because Jerome Powell and his colleagues believe that doing so prematurely could erase the progress made in taming inflation. They are committed to “seeing the data through” before making any moves, mindful of the lessons from the past and the risks of acting too soon.

For now, investors, businesses, and households will need to navigate an environment of higher rates a little longer. But the clarity offered today suggests that when the Fed does pivot, it will do so with confidence that the U.S. economy is truly ready for lower borrowing costs.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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