The Logic Behind the Fed’s “Hold the Line”: Why Powell Won’t “Hop on Trump’s Rate Cut Train”
High-Energy Summary
Trump has pushed for rate cuts 17 times: From January to June, he has posted repeatedly on social media, calling Powell “Mr. Too Late” and “stupid,” demanding at least a 2–3 percentage point cut, claiming it would save the U.S. hundreds of billions of dollars annually.
Why won’t Powell cut rates? Same old mantra: wait for the data, assess tariff impact, and observe inflation trends.
What does holding rates mean for crypto? High short-term volatility, cautious capital flow, and in the long term, liquidity may slow or even reverse.
On June 24, 2025, Trump posted on his social media platform crypt:“Mr. Too Late,” Fed Chair Jerome Powell, will testify in Congress today to explain why he refuses to lower interest rates. Europe has cut rates 10 times — we’ve done zero. No inflation, booming economy — we should cut by at least 2–3 percentage points. That would save the U.S. $800 billion a year.
This marks Trump’s 17th call for rate cuts.So — why is Trump so desperate? And why won’t Powell give in?This article breaks it all down for you.
Powell’s Deeper Logic Behind Holding Off on Rate Cuts
- Trump’s Reasons: Hitting the Pain Points
Offset Tariff-Driven Inflation:
After the U.S. imposed tariffs on Chinese goods, import prices rose, fueling inflation and raising costs for households and businesses. Trump believes the Fed should cut rates to “alleviate” this pressure.
Ease Government’s Interest Burden:
U.S. debt interest payments are staggering — nearly $800 billion a year. Trump argues a 2-point rate cut could save $600–800 billion annually.
Stimulate the Economy and Stock Market:
Lower rates boost liquidity and encourage investment. “The stock market is my approval rating,” Trump claims — he’s eager to stabilize the economy and boost voter confidence through monetary easing. - Powell’s Cautious Logic: Data Is King
A. Strong Employment Means No Rushed Easing
Despite a 0.3% GDP decline in Q1 2025, Powell doesn’t view this as a sign of recession. He focuses on the hard data: unemployment steady at 4.5%, wage growth above 4% annualized, and a labor market more resilient than many assume.From the Fed’s perspective — this isn’t a crisis that demands immediate rate cuts.
More importantly, Powell doesn’t want premature easing to disrupt this structure. At the latest FOMC meeting, he stated:“Labor market stability not only gives us more observation windows, but also reduces the systemic risk of policy misjudgments.”
B. Inflation Isn’t Dead: Core Metrics Still Elevated
While headline PCE and CPI appear to be cooling (e.g., April PCE up only 2.1% YoY), core inflation — especially in services — remains stubbornly high, once hitting 3.4%.Core inflation is Powell’s key focus — it strips out volatile energy and food prices, reflecting deeper structural inflation.
At the same time, Powell has clearly stated one view: “If we cut rates without sufficient confirmation and inflation resurges, our policy credibility will suffer a heavy blow.”This means the Federal Reserve would rather cut rates later than make the same mistake it did in underestimating inflation in 2021–2022.
C. Tariff Impacts Still Unclear: No Rash Moves
Another hot topic: tariffs. Since April, the Trump administration has aggressively raised trade barriers, especially on Chinese tech products and autos.These may raise government revenue short-term — but also trigger imported inflation by raising input costs.
Powell points out: tariff pass-through effects are complex and not immediate. For example, taxed goods may have been imported months ago, so current prices don’t yet reflect new duties.He illustrated with a metaphor:“It’s like watching a stone thrown into a pond — the ripples take a few seconds to appear.”
Thus, cutting rates now = throwing fuel on a fire whose full flames haven’t even risen yet.
D. Internal Division: Dot Plot Reveals a Split House
The June FOMC dot plot shows a rare divide:
7 members oppose cuts
10 support two cuts
2 support even more aggressive easing
This polarization means Powell must adopt a “maximally centrist stance.Hence his consistent “no promises, no rejections” messaging in press conferences — preserving market imagination while avoiding firm signals. This frustrates traders, but preserves policy flexibility.
E. Market Expectations vs. Reality Need Rebalancing
And finally — markets have overhyped rate cuts themselves.
At the start of the year, rate futures priced in 6 cuts totaling 150bps, starting as early as March.Today: zero cuts, with Powell still watching. By holding, the Fed corrects overblown expectations, preventing premature liquidity-driven asset bubbles.This is especially relevant for crypto: the 2021 bull run was largely liquidity-fueled. If the Fed keeps easing too soon, assets like BTC could enter another “hollow boom”, distorting price discovery and long-term market health.
In short: Powell isn’t opposing Trump — he’s afraid of “early joy, late regret.” With stable employment, sticky core inflation, and unclear tariff dynamics, the Fed is choosing to wait for clearer data over chasing political noise.
What Does the Fed’s “Hold” Mean for Crypto?
Short-Term: Uncertainty and Caution
Crypto markets are jittery. Bitcoin holds around $105K, but volatility is rising, with no clear direction. Funds are sitting on the sidelines.Medium-Term: Positive Signals May Rebuild
The dot plot suggests two cuts later in the year, possibly starting in September. When the Fed does pivot, it could strongly boost crypto sentiment.Risk-Off Mode: Conservative Positioning
Investors are shifting to safer assets. Crypto ranks lower in the capital stack for now — funds prefer cash, short-term paper, and fortified positions.Regulatory Tailwind: A Quiet Boost for Crypto
The Fed is loosening bank oversight, removing “reputation risk” constraints. This clears a path for banks to serve crypto clients more openly — an often-overlooked but structurally bullish policy shift.
Conclusion
Trump’s public rants at Powell are on full display — TV, social media, everywhere.But the Fed doesn’t dance to politics — it listens to data.And so should crypto markets.Don’t be distracted by headline yelling or YouTube theatrics — look at fundamentals.Next time you see “Trump demands Powell cut rates” in the news, remember:That’s just market white noise.The real decision lies in the data — and the dot plot.
