Tariffs are rising, inflation’s not backing down, and now it’s Powell vs. Trump on rate cuts. This standoff could flip the script on stocks, crypto — and the entire U.S. economy in 2025.
Federal Reserve Chair Jerome Powell is holding the federal funds rate steady at 4.25%–4.50%, despite mounting pressure from President Trump. Why? Tariffs. With a 10% blanket tax on imports and a massive 145% tariff on Chinese goods, Powell believes cutting rates now could fuel inflation — not fix it. He’s taking a cautious, “wait-and-see” approach, worried that early cuts might backfire if tariff-driven price hikes become permanent.
Trump, on the other hand, wants rate cuts urgently. He says lower rates will act as “jet fuel” for the economy, offsetting the slowdown caused by his own trade policies. He argues inflation is cooling — pointing to falling gas and grocery prices — and claims Powell is “playing politics” by waiting too long. Trump's also under pressure: $6.5 trillion in Treasury bonds are maturing this June, and refinancing at lower rates could save the government billions.
But Powell is resisting hard. Not only to protect the Fed’s independence — which shields it from political influence — but also because the data doesn’t justify a cut yet. Inflation is still running at 2.4%, above the Fed’s 2% target, and the economy added 177,000 jobs in April, suggesting no immediate crisis. Legally, Trump can’t remove Powell without cause, and Powell has committed to serving his full term through May 2026.
Still, markets are reacting to every word. When Trump softened his rhetoric in April, futures jumped 2%, and AI stocks like Vertiv (+11.9%) and Palantir (+8.7%) surged. Analysts say a rate cut would boost rate-sensitive sectors like tech and consumer discretionary — but if inflation keeps rising, it could wipe out those gains fast. Some warn that weakening Fed independence could scare off global bond buyers, pushing yields higher and stocks lower in the long run.
Crypto? Rate cuts usually mean more liquidity — and that’s bullish. A study from Kingston University showed that 65% of Bitcoin’s movements are tied to dollar liquidity. In fact, softer inflation data last year sent BTC past $64,000. If Powell caves, the crypto crowd expects liftoff. But there’s a catch: tariffs could strengthen the dollar, and ongoing trade war volatility might push investors to safer assets like gold, which already hit $3,500/oz in April.
In the big picture, Powell is trying to steer the economy with data and patience, while Trump wants aggressive moves to sustain momentum and calm markets. But here's the twist: Trump’s own tariff strategy may be causing the very inflation Powell is worried about. It's a high-stakes tug-of-war — and whichever way the Fed moves next could decide the fate of both Wall Street and Web3.