Trump’s Fed Shakeup: Brace for Interest Rate Turbulence in 2025

Washington's monetary policy playbook just got tossed out the window. President Trump's latest Fed overhaul sends shockwaves through markets—and your portfolio might be collateral damage.

Rate Roulette Begins

The Oval Office isn't waiting for economic indicators. With two new hawkish appointees and whispers of Powell's early exit, the Fed's independence now looks like Wall Street fanfiction.

Market Whiplash Ahead

Traders are dumping rate-sensitive assets as the yield curve starts resembling a rollercoaster designed by meme-stock enthusiasts. Bitcoin's up 8% on the news—because nothing says 'stable store of value' like betting against central bank credibility.

Bankers Hate This One Trick

The financial elite's favorite cocktail party topic? How Trump just turned the Taylor Rule into the Taylor Swift Rule—shaking it off with zero regard for traditional inflation models.

Welcome to the era of policy-by-tweet, where your 401k is just another reply button away from volatility. (But hey—at least the bond market's pain makes crypto look almost respectable.)

Interest Rate Cuts by the Fed

The Fed’s interest rate decision requires 12 votes, meaning seven members must support a rate cut. In the last meeting, two members expressed their desire for a rate cut, even adding a dissenting note to the decision. Bowman and Waller also clearly advocate for a rate cut in September. Kugler announced his resignation before his term ended, potentially paving the way for Powell to do the same. Powell’s term ends in May, while Kugler’s ends at the beginning of the year.

Trump will appoint a new member to replace Kugler, bringing the number in favor of cuts to three. With four more needed, reaching seven by September seems plausible, especially as manipulated labor figures might now favor Trump with a change in personnel, revealing a clearer economic slowdown.

Fed Members Speak Out

This week, Fed members made public statements for the first time after the interest rate decision. We shared a briefing on Kashkari this afternoon, suggesting the number supporting a rate reduction might have risen to four. Let’s quickly review what each member has said in the past few hours.

“The Fed must respond to the slowing economy. Unemployment figures are crucial, but the Fed knows revisions are possible.

Adjusting policy interest rates in the NEAR term remains appropriate. Though I won’t know the inflation answer for some time, the slowdown data is clear. Two rate cuts this year still seem feasible. Changing the direction of rates is preferable to waiting.”

– Fed’s Kashkari

“Understanding uncertainty’s impact on the economy is vital. Uncertainty is evident in areas of long-term investment. We must examine data holistically to measure uncertainty levels.” – Fed’s Collins

“The Fed must work more to bring inflation to 2%. A policy adjustment in the coming months is likely. We cannot wait for complete clarity to act.

It’s unlikely that tariffs will permanently increase inflation, requiring monetary policy balance. The labor market has weakened, and further slowdown is undesirable. We need to adjust monetary policy to align with risks to the Fed’s goals.” – Fed’s Daly

This scenario suggests the inclusion of Daly and Kashkari, as well as a new member, could raise the number of those advocating rate cuts to five. Keeping rates steady against five dissenting votes WOULD be unsettling for the Fed. Consequently, the likelihood of other members shifting their views like Daly and Kashkari has increased compared to last week.

This was one reason for the rise experienced in the last 24 hours. However, Trump, as usual, can take steps to lower cryptocurrencies independently of interest rates. For example, an additional 15% tax was just announced for Japan, and secondary taxes for Putin will be enforced on Friday.