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The Federal Reserve reinforced its independence by reappointing 11 of 12 regional bank presidents, closing a potential loophole for political influence ahead of Jerome Powell’s term ending in May 2026.
Fed policymakers signaled only one additional rate cut in 2026 despite pressure from the Trump administration, which advocates for faster rate reductions to support the economy.
Trump proposed “THE TRUMP RULE,” demanding lower interest rates even if the market performs well, but Fed decisions remain data-driven, with emphasis on controlling inflation over market performance.
Market reactions suggest that strong economic data reduce expectations for imminent rate cuts, while mortgage rates are more influenced by investor demand than the Fed’s short-term rate moves.

An AI tool created this summary, which was based on the text of the article and checked by an editor.

The next Fed chair may be more receptive to the president’s calls for rate cuts, but they’ll have to convince other central bank policymakers to give up their independence.

The Federal Reserve withstood pressure from the Trump administration during Jerome Powell’s final full year as chair, maintaining its independence and waiting to lower interest rates until policymakers at the central bank saw a rise in unemployment outweighing the risk of inflation resurging.

While Powell’s term as chair ends in May, the Fed’s governing board this month closed an opening the Trump administration could have exploited to undermine its independence, by signing off on the reappointment of 11 of the Fed’s 12 regional bank presidents.

Fed watchers say that means that the Trump administration may have to wait patiently for more rate cuts in 2026. In approving the third rate cut of the year on Dec. 10, Fed policymakers indicated that they’re likely to approve just one additional rate cut in 2026 and another in 2027.

“If I’m reading this properly, they just Trump-proofed the Fed,” University of Michigan economics Professor Justin Wolfers posted on X of the Fed’s move to get a jump on reappointing regional bank presidents.

That didn’t stop the President himself from announcing “THE TRUMP RULE” for Powell’s successor, following news that the economy expanded at an annual rate of 4.3 percent during the third quarter.

“I want my new Fed Chairman to lower Interest Rates if the Market is doing well, not destroy the Market for no reason whatsoever,” Trump posted on Truth Social two days before Christmas.

The Dec. 23 gross domestic product report from the Bureau of Economic Analysis had Trump thinking about the Fed’s interest rate strategy, because policymakers have signaled they’re inclined to wait for signs that the economy continues to cool before approving more rate cuts.

A strong jobs or GDP report can send stock indexes tumbling, because investors believe such news reduces the odds of future rate cuts — or can even get Fed policymakers talking about hiking rates again.

“Nowadays, when there is good news, the Market goes down, because everybody thinks that Interest Rates will be immediately lifted to take care of ‘potential’ Inflation,” Trump complained.

“The United States should be rewarded for SUCCESS, not brought down by it,” Trump concluded. “Anybody that disagrees with me will never be the Fed Chairman!”

A leading candidate to succeed Powell, National Economic Council Director Kevin Hassett, agreed with Trump that the Fed should keep cutting rates, crediting AI with boosting the economy and relieving inflationary pressures.

“If you look at central banks around the world, the U.S. is way behind the curve in terms of lowering rates,” Hassett said in a Dec. 23 CNBC “Money Movers” interview.

Before the Fed initiated a series of rate cuts in September based on data showing weakness in the job market, the Trump administration was reportedly advised by outside lawyers not to try to fire Powell.

But Trump and allies like Federal Housing Finance Agency Director Bill Pulte have continued to pressure Powell to lower rates faster or resign, with the president stating bluntly in November that “I’d love to fire his ass.”

Although Hassett seems to be in tune with Trump’s desire to keep lowering rates to supercharge the economy, that doesn’t mean that the next Fed chair will be able to convince other central bank policymakers of the wisdom of such a move.

In the 9-3 vote to cut rates on Dec. 10, Trump appointee Stephen Miran held out for a more drastic half percentage point rate cut. But Federal Reserve governors Austan Goolsbee and Jeffrey Schmid voted against a December rate cut.

The Fed’s decisions on rates are made by the Federal Open Market Committee (FOMC), which consists of 12 voting members: The seven members of the Board of Governors of the Federal Reserve System, plus five presidents of regional Federal Reserve banks.

If Trump succeeds in ousting Biden appointee Lisa Cook from the board, a move that’s been temporarily stymied by courts, he’ll have appointed four of the seven members of the Fed’s Board of Governors.

But while Powell must step down as chair in May, he hasn’t said if he’ll exercise his right to stay on as a regular board member until his term is up in 2028. And with 11 of the 12 regional Federal Reserve bank presidents now set to continue serving until 2031, the odds are slim that a majority of Fed policymakers will follow “THE TRUMP RULE.”

After the release of the latest GDP numbers, futures markets tracked by the CME FedWatch Tool put the odds of a Jan. 28 Fed rate cut at just 14 percent, down from 24 percent on Dec. 16. Futures market investors, who had previously been betting that the next Fed rate cut would be in April, now see a June rate cut as more likely.

Even if the Trump administration was able to impose its will on the Fed, rate cuts might not have the desired effect on mortgage rates and Treasury yields.

While the Fed has direct control over the short-term federal funds rate — the rate banks charge each other for overnight loans — long-term interest rates are determined largely by investor demand for government debt and mortgage-backed securities.

After the Fed approved three rate cuts totaling a full percentage point at the end of 2024, mortgage rates went up by an equal measure as investors saw inflation numbers moving in the wrong direction.

“I would suspect that not only the U.S. bond markets, but global bond markets would riot pretty decisively” if investors believed the Trump administration was influencing Fed policy, BMO Private Wealth chief market strategist Carol Schleif told Reuters in August.

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