The tug-of-war between President Trump and Fed Chair Jerome Powell is heating up, and Wall Street is caught in the middle.
According to the FedWatch tool, there’s literally a 0% chance of a rate cut at the upcoming Federal Reserve meeting.
The odds are in stark contrast to the president’s demands for an immediate 100-basis-point cut, underscoring the growing divide just six months into his term.
As of June 12, futures markets reflected zero expectation that the Fed will cut rates at its June 18 meeting. There was even a slight chance of a hike.
JUST IN 🚨: There is now a 0% chance of an interest rate cut at the June FOMC meeting. Instead, the market is now giving a very, very, very small chance of a rate hike 😱👀😱👀 pic.twitter.com/tIPvhLxOC1
undefined Barchart (@Barchart) June 12, 2025
Undeterred, Trump took to Truth Social to demand the Fed slash rates by a full percentage point, arguing it would allow the U.S. government to pay “much less interest on debt coming due.”
He pointed to the latest Consumer Price Index (CPI) data as justification. The Department of Labor reported CPI rose just 0.1% in May, translating to an annual increase of 2.4%.
The Fed, which targets 2% inflation, has been carefully balancing price stability with full employment.
But while inflation is slowing, Trump’s tariff policies threaten to reverse that trend. Former Treasury Secretary Janet Yellen has warned that the tariffs could push inflation as high as 3%.
At the same time, economists voiced concerns about the contradictory nature of Trump’s broader economic agenda: pairing aggressive deficit spending with growth-dampening tariffs.
Stagflation and ballooning deficits?
Trump’s second term may end up defined by an uneasy combination of stagflation and swelling deficits, analysts warn.
His tariffs have already “contributed to stagflation, a deceleration in economic growth, and an expected acceleration in net inflation,” wrote Charles Schwab’s Liz Ann Sonders and Kevin Gordon.
Oxford Economics seconded that concern. Its chief U.S. economist expects the initial round of tariffs will slow GDP growth and push core inflation to 3.9% this year.
Although Trump has since softened his tariff rhetoric. the average U.S. tariff rate has climbed to its highest level in over a century, according to The Budget Lab at Yale University.
Meanwhile, Trump’s “Big, Beautiful Bill” is making its way in Congress.
The latest version introduces so-called “Trump accounts”, tax-advantaged savings accounts for children, seeded with a one-time $1,000 government deposit.
According to the Committee for a Responsible Federal Budget, the Trump accounts alone would add $17 billion to the deficit over the next decade.
That’s on top of the $2.4 trillion the entire bill is projected to add to the deficit over the next ten years, according to the Congressional Budget Office.
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