Tensions between the American administration and the central bank are rising again. US President Donald Trump has openly urged the Federal Reserve (Fed) to immediately lower interest rates – even outside the standard schedule of monetary policy meetings. His sharp rhetoric comes at a time when markets almost unanimously expect rates to remain unchanged.
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Trump: “Even a third-grader knows it’s time to cut rates”
Donald Trump has publicly attacked Fed Chair Jerome Powell several times in recent days. At a White House meeting, he said the central bank should convene a “special meeting” and cut rates immediately.
“What is a better time to lower interest rates than now? Even a third-grader would know that,” Trump said according to videos shared on social media X.
He struck a similar tone on his Truth Social platform, where he wrote that Powell should cut rates “immediately.” Back in January, the president claimed that the US should have “significantly lower” rates, ideally the lowest in the world. He called Powell “behind the times” and accused him of “damaging the country and its national security” with his approach.
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Why Trump is pushing for cheaper money
The American president’s motivation is clear. Lower interest rates would reduce the cost of servicing the enormous national debt, which currently stands at around 39 trillion dollars. At the same time, they would support economic growth, the real estate market, and stocks.
From investors’ perspective, lower rates have another crucial effect – they increase the appetite for risk. Cheaper money boosts market liquidity and often flows into riskier assets, such as stocks or cryptocurrencies.
Fed remains calm, markets expect stability
Despite political pressure, the Fed is likely preparing to hold its current course. The two-day meeting begins on Tuesday with a decision expected on Wednesday.
According to data from CME futures markets, there is currently a 99% probability that rates will remain in the range of 3.50% to 3.75%. The outlook for the next meeting on April 29 is similar, with markets seeing a 97% chance that nothing will change.
A personnel change in Fed leadership could alter the situation. Trump’s favored candidate Kevin Warsh is set to take over in mid-May, when Powell’s term ends. Warsh is considered a candidate who could be more open to rate cuts.
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Oil shock and inflation complicate the situation
Geopolitics also factors into the Fed’s decision-making. The conflict between the US and Iran is pushing oil prices higher, which raises fuel costs and subsequently transportation and food prices. The result could be higher inflation.
Inflation in February held at 2.4%, but according to estimates, it could rise in March. The inflationary pressure could paradoxically force the central bank to raise rates rather than cut them.
What this means for cryptocurrencies
For the crypto market, the current situation is paradoxically less negative than it might seem. If the Fed doesn’t cut rates but also doesn’t raise them, it means relative stability.
Higher oil prices may push inflation up, but their impact is so far unclear. The Fed is likely to remain cautious and wait to see how the situation develops.
According to experts, this means that cryptocurrencies will not face strong downward pressure. On the contrary, any future rate cuts could serve as a catalyst for further growth, as new liquidity would flow into the market.
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