Thanks to the artificial intelligence (AI) revolution, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) have made a habit of catapulting to new highs amid a wall of worry. But renewed tensions between President Donald Trump and the Federal Reserve may limit the stock market’s upside.
President Trump has been at odds with the Federal Open Market Committee (FOMC) — the 12-person body, including the Fed chair, responsible for setting the nation’s monetary policy — since his second, non-consecutive term began on Jan. 20, 2025. Though the president has opined that policymakers should slash interest rates, Trump is completely missing the bigger picture for the U.S. economy and stock market.
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Donald Trump takes another jab at the FOMC
Earlier this week, President Trump renewed his criticisms of the FOMC, but spared his handpicked Fed Chair Kevin Warsh. Said the president:
My point is, years ago, 25 years ago, when the country announced good numbers, interest rates went down because we had a stronger economy. Now, when we announce good numbers, the better they are, the worse it is for interest rates.
Trump has previously suggested that interest rates should be slashed to 1% or lower. For context, former Fed Chair Jerome Powell and the FOMC lowered lending rates six times between September 2024 and December 2025 to the current federal funds target rate of 3.50%-3.75%. The president has argued that the FOMC hasn’t cut rates quickly enough to support robust economic growth.
Presumably, lower interest rates would spur job growth, encourage aggressive AI data center spending, and make it easier for the federal government to service its total debt, which surpassed $40 trillion for the first time on Aug. 18.
The evolution of Trumpflation makes rate cuts highly unlikely
However, Donald Trump’s continued digs at the FOMC completely miss the impacts that his own policies (i.e., Trumpflation) are having on consumer prices.
Former Fed Chair Powell and current Fed Chair Kevin Warsh have repeatedly cited President Trump’s tariffs as a source of elevated inflation. The Trump administration recently announced a new wave of global tariffs, ranging from 10% to 12.5%, on more than 80 countries. Adding duties to select imported goods can increase production costs for businesses, which are then passed to consumers.
