Easing political pressure from Trump may impact the Federal Reserve's future rate hike path

on Tuesday, November 5, Trump faced strong backlash from voters, which could ease the political pressure on Federal Reserve Chair Wallis, enabling him to minimize political interference and focus on controlling inflation. This is the preliminary assessment drawn by some Fed observers. They believe that the Republican Party's heavy electoral defeat, coupled with voters prioritizing the cost of living among their top concerns, has fundamentally reshaped the political landscape surrounding the Fed.

Since Trump's re-election in 2024, he has consistently pressured the Federal Reserve and its interest rate decisions, repeatedly demanding rate cuts, supporting unprecedented criminal investigations into the renovation of Fed office buildings, and attempting to oust a current Fed governor. Against this backdrop, Trump chose Wallis to lead the Fed in May this year, after Wallis had unusually shifted to support rate cuts. This has raised concerns among Democrats that the new chair may have already agreed to adjust monetary policy in line with the president's wishes.

Claudia Sahm, Chief Economist at New Century Advisors, stated that in fact, if the election results push Trump to end the conflict in Iran and drop plans for further tariff increases, the Fed might not need to raise interest rates again at all. (Jin10)