Ever since his presidency began, Donald Trump has been vocal about his thoughts on interest rates. He’s made it clear: he wants the Federal Reserve to slash rates—and he wants it now. But Wall Street? Not so fast. Analysts are signaling that rate hikes might actually be on the horizon instead.
Let’s unpack what’s happening.
Trump’s Push for Lower Rates
At the World Economic Forum in Davos, Switzerland, Trump didn’t hold back. He called for an immediate drop in interest rates, even suggesting he knows more about rates than Fed Chair Jerome Powell. Bold statement, right?
Despite the pressure, the Federal Reserve seems unlikely to budge. Wall Street predicts that rates will stay put at 4.25%-4.5%, following last year’s significant 100-basis-point cuts. But here’s the kicker: experts think this might be the lowest rates will go, given the U.S. economy’s resilience and Trump’s policies that could heat up inflation.
What Wall Street Is Saying
Thanos Papasavvas, the founder of ABP Invest, doesn’t mince words. Writing in the Financial Times, he predicted that instead of cutting rates, the Fed might have to raise them by September. Why? Because inflation expectations are climbing, and the Fed wants to keep its credibility as an inflation fighter intact.
Papasavvas went as far as to say the Fed will prioritize controlling inflation over boosting employment if push comes to shove. That’s a big deal—it means they’re sticking to their guns, even if it ruffles feathers.
More Voices Chime In
Dan Ivascyn from Pimco agrees that the Fed isn’t looking to slash rates anytime soon. “For now, they’re likely to hold steady,” he said. But he also didn’t rule out the possibility of rate hikes, especially with surveys pointing to rising inflation expectations among consumers.
Even Bank of America has weighed in, declaring that the Fed’s rate-cutting days are already behind us. They believe it’s time to start talking about potential hikes instead.
And Torsten Sløk, chief economist at Apollo, threw another twist into the mix. He says there’s a 40% chance rates will rise this year, as the economy appears to be regaining steam. “The narrative that monetary policy is restrictive is simply wrong,” Sløk remarked.
The Bottom Line
Trump may be pushing hard for lower rates, but the Federal Reserve has its eyes on the bigger picture—keeping inflation under control. With a strong economy, resilient consumer spending, and inflation concerns bubbling up, Wall Street sees more rate hikes as a real possibility.
So, while Trump’s call for immediate rate cuts makes headlines, don’t hold your breath. The Fed’s next moves might surprise everyone—just not in the way Trump hopes.
