Trump Mandates Rate Cuts From Next Fed Chair Despite Soaring GDP

2025-12-24 economy

Washington D.C., Tuesday, 23 December 2025.
President Trump issued a strict ultimatum for the next Federal Reserve Chair: cut interest rates regardless of economic strength, claiming this could fuel unprecedented 20% GDP growth.

The Loyalty Test: Rate Cuts Over Economic Data

On Tuesday, December 23, 2025, President Donald Trump established a strict loyalty test for the next Federal Reserve Chair, declaring via Truth Social that any successful candidate must be willing to lower interest rates even when the economy is performing well [1][6]. In a statement that directly challenges the traditional independence of the central bank, Trump asserted, “Anybody that disagrees with me will never be the Fed Chairman” [1][6]. This ultimatum comes as the administration seeks a successor to Jerome Powell, whose term is set to expire in May 2026 [2][6]. The President’s demand for looser monetary policy arrives amidst a complex economic backdrop; on the same day, the U.S. Department of Commerce reported that third-quarter GDP grew at an annualized rate of 4.3%, significantly beating Wall Street expectations of 3.2% [5][6].

Balancing Growth and Inflationary Pressures

While the President envisions a “Golden Age” of growth fueled by lower borrowing costs, the latest economic data presents a dilemma for traditional monetary policy [6]. Alongside the robust GDP expansion—which rose from 3.8% in the second quarter—inflation has ticked upward [5]. The data indicates that inflation reached 2.8% in the third quarter, an increase from 2.1% in the previous quarter and well above the Federal Reserve’s long-standing 2.0% target [5][6]. Typically, central banks raise or hold interest rates steady to cool such overheating conditions, yet Trump has rejected this orthodoxy. He argued on Tuesday that “Strong Markets, even phenomenal Markets, don’t cause Inflation, stupidity does,” and suggested that without Fed interference, the U.S. could achieve growth rates of “10, 15, and even 20 GDP points in a year” [6][7].

The Independence Debate and Leading Contenders

The President’s insistence on influencing rate decisions has intensified the scrutiny on the frontrunners for the Fed Chair position. Kevin Hassett, the current Director of the National Economic Council, and Kevin Warsh, a former Fed Governor, are viewed as the top contenders, with Trump recently noting that “the two Kevins are great” [4][6]. However, the feasibility of a compliant Fed Chair remains a point of contention. Hassett, despite his alignment with the President’s pro-growth theories, stated in a recent interview that the Federal Open Market Committee holds the ultimate power. He emphasized that the President’s views would have “no weight” if they contradicted the data, adding that “in the end, the job of the Fed is to be independent” [4]. Meanwhile, markets reacted cautiously to the friction between the White House and the central bank, with Treasury yields rising as investors digested the implications of the President’s ultimatum alongside the sticky inflation data [6].

Sources

Federal Reserve Monetary Policy