Fed Interest Rate Hike Today: Trump’s Pressure Remains
- The Federal Reserve is widely expected to pause interest rate cuts on Wednesday, with several policymakers and economists forecasting further cuts later this year-as concerns spread in recent...
- Traders have priced in 2.8% odds of the Federal Reserve's Federal open Market Committee lowering interest rates from a 3.5% to 3.75% range by a quarter point to...
- Betting markets overwhelmingly favor no change to interest rates: Polymarket and Kalshi both offered 99% odds of rates settling between 3.5% and 3.75%.
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The Federal Reserve is widely expected to pause interest rate cuts on Wednesday, with several policymakers and economists forecasting further cuts later this year-as concerns spread in recent weeks about the central bank’s independence from the Trump administration.
Some Fed officials have forecast interest rate cuts later this year, but not in January.
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Key Facts
Traders have priced in 2.8% odds of the Federal Reserve’s Federal open Market Committee lowering interest rates from a 3.5% to 3.75% range by a quarter point to between 3.25% and 3.5%, according to CME’s FedWatch tool, matching expectations from Wall Street, according to FactSet.
Betting markets overwhelmingly favor no change to interest rates: Polymarket and Kalshi both offered 99% odds of rates settling between 3.5% and 3.75%.
Kansas City Fed President jeff Schmid said earlier this month that it would be best to hold the Fed’s benchmark rate,as policymakers aim to lower inflation to 2%,adding his “preference would be to keep monetary policy modestly restrictive.”
The Fed has held interest rates steady at a 5.25%-5.5% range sence July, after raising them aggressively throughout 2022 and 2023 to combat high inflation.
Will The Fed Lower Interest Rates This Year?
The Fed’s “dot plot,” a graph that outlines the central bank’s policymaking expectations, indicated last month that just one quarter-point interest rate cut is expected in 2026, followed by one more in 2027, when the funds rate is projected to hit a targeted rate of 3% to 3.25%. The Fed’s December statement was tweaked to note that it would consider the “extent and timing of additional adjustments” to rates,mirroring language last used by the central bank in December 2024,after which the FOMC opted not to approve cuts until September 2025. Paulson signaled some support for more cuts later this year, suggesting “some modest further adjustments to the funds rate” would “likely be appropriate later in the year.” Traders have priced in odds of 17.4% of interest rates lowering by a quarter point in March,28.1% in April and 46.8% in June, when odds of a half-point reduction have increased to 14.7%.
When Will Trump Replace Jerome Powell?
During a rally in Des Moines, Iowa, President Donald Trump said he would announce his nominee to succeed Powell “pretty soon.” Trump, who has criticized Powell for not lowering interest rates more quickly, added, “When we have a great Fed chairman … you’ll see rates come down a lot.” Powell’s term as Fed chair ends in may, though he could still serve as a governor and participate in FOMC decisions unless he steps down entirely.Wolfe Research’s chief economist Stephanie Roth wrote in a note the “single most likely window” for Trump to announce Powell’s success is around the FOMC’s January meeting, noting, “More broadly, the decision could come
Department of Justice Investigates Federal Reserve Chair Jerome Powell
The Department of Justice (DOJ) opened a criminal investigation into Federal Reserve Chair Jerome Powell on January 11, 2026, following grand jury subpoenas served to the Federal Reserve. This action escalates tensions between the Biden administration and Powell, who was originally appointed by former President Donald Trump in 2018.
Background on Rate Disputes
The investigation follows months of public criticism from Trump regarding the Federal Reserve’s monetary policy. Despite three consecutive votes by the Federal Open market Committee to lower interest rates,Trump has argued for more aggressive cuts. On December 15, 2025, Trump stated the Fed’s 0.25% rate reduction “could have been at least doubled.” He has repeatedly criticized Powell, using derogatory terms such as “siff” and “dead head.”
“This is an unprecedented action,” Powell said in a public statement. “It should be viewed in the broader context of the administration’s threats and ongoing pressure.”
Details of the DOJ Investigation
The DOJ’s investigation centers on Powell’s testimony before the Senate banking Committee in 2025.The nature of the alleged criminal activity has not been publicly disclosed.According to Forbes, Powell has vowed to “stand firm” in the face of these threats.
Economist Response
Several economists and former Federal Reserve officials have expressed concern over the DOJ’s actions.A joint statement released on JointStatement.substack.com,details their worries about the potential impact on the Federal Reserve’s independence.
This is a developing story and will be updated as more data becomes available.