I still remember the day in 2018 when then-President Trump first broke the unwritten rule: never publicly bully the Federal Reserve. Markets froze for a second. Fast forward to December 10, 2025, and here we are again – same song, slightly different verse.
Only hours after the Fed announced its third 25-basis-point cut of the year, Trump sat down with a room full of CEOs and let rip. The cut, he said, was “rather small.” In fact, it could have been “at least doubled.” He even tossed in a personal jab, calling Chair Jerome Powell “a stiff.” Classic Trump – blunt, unfiltered, and instantly headline-making.
Why Trump Is Suddenly Back in the Fed-Bashing Mode
Let’s be honest – this isn’t really sudden. Trump has never hidden his belief that low interest rates are the magic elixir for economic growth. During his first term he repeatedly called for zero or even negative rates. The man loves cheap money the way others love coffee.
But context matters. When he left office in January 2021, the fed funds rate was basically zero. Powell and company then spent 2022 and 2023 jacking rates to 5.33% to fight inflation. Now, with inflation cooling and the labor market softening just a touch, the Fed has pivoted to cautious easing – three modest quarter-point cuts in 2025.
Trump sees victory laps everywhere. GDP is growing, unemployment is low, the stock market keeps hitting records. In his mind the economy is roaring and the only thing holding it back is… the Federal Reserve moving too slowly.
“They could have at least have doubled it. A rather small cut by a stiff.”
– President Donald Trump, White House CEO roundtable, Dec 10 2025
What the Fed Actually Did – and Why 25 bps Isn’t “Small” to Everyone
Perspective is everything. To a real-estate developer who once financed skyscrapers with ultra-low rates, 25 basis points probably feels like a rounding error. To bond traders and central bankers, it’s a deliberate, data-dependent step.
The Fed’s latest dot plot still shows only two or three cuts penciled in for 2026. Powell has repeated ad nauseam that the committee wants to see more evidence that inflation is firmly on the path to 2% before getting aggressive. Translation: we’re not going back to emergency-level rates just because the stock market is happy.
And here’s the part many commentators miss – the Fed is also watching the labor market very closely. Yes, unemployment is low, but job openings have fallen and wage growth has moderated. A too-aggressive easing cycle could reignite inflation without actually helping workers all that much.
Markets Didn’t Exactly Hate the “Small” Cut
Stocks actually rallied modestly after the announcement. The 10-year Treasury yield dipped a few basis points – exactly the soft landing script most investors have been praying for. Mortgage rates ticked below 6.6% for the first time in months. Small? Maybe. Meaningless? Hardly.
In my experience covering these events, the bond market is a far better lie detector than Twitter. Right now bonds are saying: “We believe the Fed is engineering a soft landing.” If traders thought Trump’s criticism was about to force Powell’s hand, you’d see yields plunge dramatically. They haven’t.
Could Trump Actually Influence the Fed This Time?
Legally? No. The Federal Reserve is independent (at least on paper). Powell’s term runs until May 2026, and Trump would need Senate confirmation to replace him early – something that almost certainly wouldn’t fly.
Politically? That’s trickier. Public jawboning worked (a little) during Trump’s first term – the Fed paused its 2018 hiking cycle after relentless criticism. But Powell has grown a thicker skin, and the current committee is notably hawkish compared to 2019.
Perhaps the most interesting aspect is timing. We’re barely six weeks from inauguration. Treasury Secretary nominees are floating ideas about restructuring the Fed, limiting its mandate, even tying policy to gold (yes, really). The noise is only going to get louder.
What a 50 bps Cut Would Have Actually Meant
Let’s play the counterfactual game Trump loves so much. Suppose the Fed had delivered a half-point cut yesterday.
- The dollar would have dropped sharply – great for exporters, bad for anyone worried about imported inflation.
- Stock and crypto markets would have exploded higher (more risk-on juice).
- Mortgage rates could have fallen toward 6% almost immediately.
- And inflation expectations? They probably would have ripped higher, forcing the Fed to slam on the brakes again in 2026.
I’ve found that the biggest mistakes in monetary policy usually come from overreacting to short-term political pressure. Just ask Paul Volcker – or Ben Bernanke after 2009.
The Bigger Picture Nobody Wants to Talk About
Here’s the uncomfortable truth: the U.S. economy is addicted to low rates. Corporations have binged on cheap debt. Homebuyers expect 3% mortgages forever. Politicians of both parties love the sugar rush.
Trump’s criticism isn’t really about 25 bps versus 50 bps. It’s about refusing to accept that the party might eventually have to end. Every central banker since Volcker has eventually been forced to play the bad guy. Powell appears willing to do it gradually rather than with a sledgehammer.
Whether that’s wise or timid depends on your time horizon – and your politics.
What Should Investors Do Now?
Nothing dramatic. The path of least resistance remains cautiously lower rates into 2026, but probably not the floodgates-open scenario some Trump supporters are dreaming about.
- Lock in longer-term CDs or Treasuries if you’re risk-averse – yields are still beat inflation.
- Refinance mortgages while you can – even small cuts compound over 30 years.
- Keep exposure to quality growth stocks – lower rates are still supportive.
- Watch the dollar – any sharp weakness could reignite commodity inflation.
Most importantly, tune out the day-to-day political noise. The Fed has shown remarkable resilience these past few years. My bet is they keep threading the needle – slow and steady – no matter how loudly anyone yells from the White House balcony.
Because in the end, markets don’t care about tweets or roundtable rants. They care about inflation, employment, and credibility. So far, Powell still has plenty of the last one.
And that, more than any 25 or 50 basis point move, is what keeps the game going.
