Will Trump succeed in pressuring the Fed to cut interest rates?

Jakarta, Pintu News – By 2026, there is a significant misalignment between the Federal Reserve (Fed) and the financial markets regarding interest rate projections in the United States. While the Fed is showing caution towards further cuts, the market is predicting two to three rate cuts this year.

Market Prediction: Interest Rate Cut in Mid-Year

Market prediction platform Polymarket shows that the probability of a rate cut at the January Federal Open Market Committee (FOMC) meeting is only 12%. The majority of participants expect interest rates to remain fixed this month. However, projections changed dramatically in the longer term. The probability of a rate cut in April increased to 81%, and in June it reached 94%.

For the whole year, the two cuts scenario has the highest probability of 24%, followed by three cuts (20%) and four cuts (17%). Overall, the probability of two or more cuts exceeds 87%. The CME FedWatch tool, which reflects expectations embedded in interest rate futures contracts, paints a similar picture. The market consensus is clear: hold out in January, start cutting in the first half, and make two to three cuts in December.

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Cautionary Signal from the Fed

Within the Fed, the narrative is different. On January 4, Philadelphia Fed President Anna Paulson indicated that further rate cuts may not be appropriate until “later in the year.”

Paulson, who has a vote in FOMC 2026, stated that “some further modest adjustments to the funds rate are likely to be appropriate later in the year” – but only if inflation eases, the labor market stabilizes, and growth hovers around 2%. This statement is in stark contrast to market expectations of a rate cut in the first half of the year.

Midterm Elections and Political Pressure

The latest poll shows that Donald Trump’s approval rating of economic policies has dropped to 36%. The main culprit is high prices. This discontent is already starting to show at the ballot box. With midterm elections approaching in November, more than 30 Republican members of the House of Representatives have announced that they will not seek re-election.

This tension creates a paradox: persistent inflation erodes Trump’s political standing, which in turn weakens his leverage over the Fed. The conditions that make rate cuts politically desirable for Trump also make them economically unjustifiable – or even deprive him of the power to demand them.

Trump and the Fed’s Dilemma

The Fed is signaling one rate cut in 2026. But here’s the paradox: sustained inflation erodes Trump’s political standing, which in turn weakens his leverage over the Fed. The conditions that make a rate cut politically desirable for Trump also make it economically unjustifiable – or even remove his power to demand one.

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Reference

• BeInCrypto. Trump’s Impossible Bet: Rate Cuts or Political Survival. Accessed on January 6, 2026