This article is not a forecast but a recommendation.
📅 July 2025. The context is as clear as it is explosive:
The Federal Reserve is now operating under a second Trump administration, well known for applying pressure on monetary policy. With just 7 months remaining in Chair Powell’s term, the Fed faces a critical test — one that could determine whether it remains a trusted steward of global monetary stability or begins to lose its institutional autonomy.
Inflation isn’t out of control, but it also hasn’t firmly returned to 2%. Consumption remains strong, supported by excess household liquidity: over $3 trillion in bank deposits earning close to zero interest.
Meanwhile, the market expects a rate cut. Trump demands one too.
But if I were Powell, I’d do the exact opposite.
And not out of spite.
1. The existential risk facing the Fed ⚠️
Recent history is full of episodes where central banks caved to political pressure and destroyed their credibility.
Argentina, Venezuela, Zimbabwe.
The Fed’s mandate is to preserve price stability, not to please the sitting president or sustain asset bubbles inflated by years of loose monetary policy.
If the Fed waits until February 2026 to act, it may already be too late. Any restrictive action then will be seen as political sabotage, and the new administration could neutralize it by appointing a loyalist or weakening the Board.
2. The unexpected move that strengthens credibility 🏛️📉
👉 Raising rates in July 2025, against market and political expectations, would be a masterstroke.
Why?
- It reinforces the Fed’s credibility ahead of its most vulnerable moment.
- It triggers a controlled correction in financial assets (stocks, real estate, crypto), draining excess liquidity safely.
- It anchors inflation expectations, potentially leading to…
Yes:
Lower long-term rates, despite the hike.
3. A result Trump might secretly welcome 🧩
Here’s the ironic twist:
🔸 By strengthening the Fed’s credibility, markets may require lower yields on 10- and 30-year Treasuries.
🔸 That means lower coupons on new debt issuance.
🔸 Which translates into less interest burden for the Treasury.
💡 Trump could even tone down his criticism if he sees that his fiscal and tariff policies can be financed at lower long-term rates, without needing to control the Fed.
4. Why is no one talking about a hike? The great silence 🤐
The fact that no FOMC member is proposing a rate hike right now is telling.
- Inflation is not fully anchored.
- Liquidity remains excessive.
- Assets are overvalued.
And yet, no one dares say the obvious.
This is a sign of institutional weakness.
Which is why, if I were Powell, I’d do what no one expects.
5. Final thought: it’s now or never ⏳
The Fed’s role is not to be popular. It is to act.
History judges central bankers not by how much volatility they avoid,
but by how well they preserve the value of money.
💥 Raising rates now would:
- Deliver a preemptive blow to latent inflation,
- Send a signal to markets that the Fed is still alive,
- And give Powell the opportunity to leave the institution stronger than he found it.
If I were Powell, I wouldn’t hesitate.