Trump's Pressure for Lower Rates Puts Fed's Autonomy to the Test

The Federal Reserve is expected to lower interest rates by 25 basis points on Wednesday, adjusting the benchmark rate to a range of 3.75–4.00%. This move comes as inflation continues to exceed the Fed’s 2% goal and the labor market remains under pressure, according to a

preview. The decision follows a government that has postponed the release of important economic indicators, leaving policymakers to make decisions with incomplete data. Experts from Allianz Research and EY note that the Fed is now prioritizing signs of a weakening job market, even though inflation concerns persist.

For leading financial institutions such as

, , and , this rate reduction could mark the beginning of a broader easing trend that encourages lending and business borrowing. Goldman Sachs’ investment banking arm has already benefited from a notable rise in advisory fees, collecting $6.76 billion in the first nine months of 2025, fueled by a 19% annual increase in M&A transactions. , which has surpassed the S&P 500 with a 27.4% increase this year, now faces a more cautious forecast as analysts question whether it can . Meanwhile, Bank of America is contending with a challenging environment shaped by tariffs from the Trump administration and ongoing geopolitical uncertainties, making growth forecasts more complex.

Political factors are also at play. Former President Donald Trump has openly criticized Fed Chair Jerome Powell, urging quicker rate reductions to counteract the impact of tariffs, and has started

for Powell when his term ends in May 2026. Treasury Secretary Scott Bessent has stated that Trump has narrowed his choices to five, including current Fed Governor Christopher Waller and former official Kevin Warsh. These developments have raised questions about the Fed’s autonomy, with some analysts warning that political involvement could hinder its ability to manage both inflation and employment.

The economic outlook remains uncertain. Although core CPI for September eased to 3%, inflation is still high, and

—attributed to efficiency gains from AI—have sparked worries about the stability of the broader labor market. Fed officials admit that AI’s sweeping changes may disrupt traditional economic signals, making policy decisions more challenging.

Market participants are paying close attention to the Fed’s upcoming

for hints about further rate reductions, with expectations of another cut in December. Meanwhile, from Microsoft and Alphabet are set to be released this week. The results are likely to affect the outlook for major energy and healthcare firms as they adapt to changing interest rates.