Trump's Economic Policies Set Stage for Tensions with Federal Reserve

President-elect Trump's proposals and Federal Reserve's cautious stance on rate cuts could lead to policy clashes in 2025.

President-elect Donald Trump's expansionary fiscal policies, including higher tariffs and tax cuts, may conflict with the Federal Reserve's cautious approach to interest rate reductions.
Federal Reserve Chair Jerome Powell has signaled that strong economic data and persistent inflation could slow the pace of rate cuts in 2025, disappointing borrowers and investors.
Trump's proposed tariffs and deportation policies are expected to create inflationary pressures while potentially slowing economic growth, complicating the Fed's monetary strategy.
The Federal Reserve is grappling with uncertainty over the 'neutral rate' of interest, with internal disagreements on how low rates should go without overheating the economy.
Powell's term as Fed chair ends in early 2026, raising speculation that Trump may appoint a new chair more aligned with his economic agenda.