Trump vs The Fed: A battle that could shake markets

Donald Trump has rounded on the US Fed, threatening to unravel the political neutrality that has underpinned decades of stability.

It feels a very long time ago that Donald Trump appointed Jerome Powell as his Fed chair nominee. Pic: Getty Images

Donald Trump, it would appear, is gearing up for another fight with the Federal Reserve.

“If the Fed had spent less time on , gender ideology, ‘green’ energy, and fake climate change, inflation would never have been a problem,” he raged on Truth Social on Wednesday, after the central bank left rates unchanged at 4.25-4.5%.

His latest broadside against the Fed underscores a fundamental clash over monetary policy that could have far-reaching consequences for markets.

This is not new. Trump has long viewed the central banks as an obstacle to his economic ambitions.

During his first presidency, he berated Chair Jay Powell for not cutting rates fast enough, breaking with decades of precedent in which presidents avoided publicly pressuring the central bank. Now, with inflation still a political headache and his second term underway, Trump appears intent on making the Fed his scapegoat once again.

The Fed, having raised rates aggressively to combat inflation, is signalling a measured approach to cuts. Trump, on the other hand, wants rates slashed—and fast.

His economic playbook hinges on cheap money to fuel growth, and he has never shown much patience for the Fed’s insistence on balancing inflation control with economic expansion. With his return to the White House, we expect a continuing assault on the central bank’s independence.

Trump’s own words make it clear how he sees the Fed’s role. This kind of rhetoric signals that he is looking for a political fight, blaming the Fed’s policies for inflation rather than acknowledging the global economic factors at play.

History offers a stark warning. Richard Nixon famously pressured then-Fed chair Arthur Burns to keep rates low ahead of the 1972 election, a move that contributed to runaway inflation later in the decade.

The Fed has spent decades since then reinforcing its independence, precisely to avoid short-term political pressures leading to long-term economic pain. The current President’s attacks threaten to unravel that hard-won stability.

Markets, for now, appear to be betting that the Fed will stick to its guns. But if Trump ramps up his offensive, expect volatility.

Investors should be watching not just for rate moves, but for signs that Powell and the Fed are willing to push back harder. The more aggressive the President’s rhetoric becomes, the greater the risk of a showdown that could shake confidence in US monetary policy.

With Trump back in the Oval Office, he’ll likely try to stack the Fed with loyalists who favour looser policy. The implications are clear: a more politicised Fed, a higher likelihood of excessive rate cuts, and potentially a resurgence of inflation down the line.

Investors should also be wary of the dollar’s trajectory—if markets lose faith in the Fed’s ability to act independently, the dollar could weaken, with knock-on effects across global asset classes.

The battle lines are being drawn.

Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.

Originally published as Trump vs The Fed: A battle that could shake markets