Trump Demands 2-3% Rate Cuts: Is Powell Next in the Crosshairs?

The Signal from Mar-a-Lago

Trump’s latest post on Truth Social isn’t just rhetoric—it’s a full-spectrum economic grenade. He’s calling for Fed Chair Jerome Powell to slash rates by at least 2 to 3 percentage points. That’s not incremental tinkering; that’s structural recalibration. And he’s not alone—this narrative is gaining traction among conservative economists and retail traders alike.

But here’s where my brain kicks in: when was the last time a president got what they wanted from the Fed? The answer? Rarely. And when they did, it often came with long-term pain.

Inflation Isn’t Dead… But It’s Sleeping

Trump argues there’s no inflation and that the economy is booming—a claim echoed in some corners of Wall Street. Yet data tells another story: core PCE remains above 2.5%, and services inflation hasn’t fully cooled.

Still, let’s play along. Suppose we accept his premise: no inflation, strong growth, and interest rates stuck at zero. Would cutting rates by two full points make sense?

In theory? Maybe. But in practice? Not without risk.

The Global Context: Why Europe Cut—And We Didn’t

Europe has cut interest rates ten times since early 2023—not because their economies are weak (they’re not), but because their central bank prioritized fiscal sustainability over price stability after years of high energy costs.

The ECB didn’t cut out of fear—it cut out of necessity to avoid deflationary spirals in an aging population with low productivity growth.

We’re not Europe. Our labor market is still tight; GDP growth hovers around 2%. Cutting sharply now could spark overheating—and rekindle inflation we’ve only recently tamed.

And yes, $80 billion in annual savings sounds tempting—but that number assumes perfect transmission across all sectors, which history shows rarely happens.

Crypto Markets & The Rate-Cut Myth

Here’s where my real expertise kicks in: as someone who built quant models tracking rate sensitivity in digital assets since before ETH staking existed—I’ve seen this pattern before.

When talk turns loud about imminent rate cuts (especially from political figures), Bitcoin tends to spike short-term—driven by FOMO and speculative positioning.

e.g., In late Q4 2023, Trump’s rate-cut rhetoric coincided with a $5k rally in BTC before fading into consolidation.

That doesn’t mean it’ll happen again—but it does mean you should be cautious about chasing momentum driven by political noise rather than fundamentals.

So What Should Powell Do?

The Fed isn’t immune to politics—but it is designed to be independent for a reason. Powell knows that lowering rates prematurely risks undoing years of progress against inflation.

crypto investors love easy narratives—’lower rates = higher prices.’ But reality is messier:

• Lower rates boost asset prices… temporarily
• They also increase leverage
• And if inflation rebounds? We get stagflation lite—bad for stocks, worse for crypto

The real threat isn’t Trump yelling—he’s always yelling—but public pressure eroding institutional independence.

The longer we let political theater shape monetary policy conversations, the weaker our financial system becomes—not stronger.