Did political heat force the Fed’s rate cut — or was it pure economics?

The Fed’s December 2025 decision to cut rates by 25bps to the 3.50–3.75% range instantly reignited the Trump vs Powell debate. On the surface, it looked like a long-awaited response to weakening data. Underneath, however, markets questioned whether nonstop political pressure had finally pierced the Fed’s independence. After weighing economist consensus, labor data, and Fed communication, the picture is mixed — but not ambiguous.

The strongest case for the cut comes from the labor market. Layoffs have quietly surged to roughly 1.17 million year-to-date, the highest since 2020, spreading beyond tech into finance, retail, and manufacturing. This isn’t an isolated sector issue anymore — it’s broad-based cooling. Several economists warned that once unemployment accelerates, it tends to move faster than policymakers expect.

opposition inside the Fed wasn’t baseless. Inflation remains near 3%, still above the 2% target after years of persistence. Core measures haven’t fully broken, and some officials worry the cut risks reigniting price pressures before inflation is truly defeated. This is where the political optics become problematic.

Trump’s relentless public pressure didn’t cause the cut — but it clearly altered the backdrop. Even if the decision was mostly data.

💡 The key takeaway: The rate cut was largely justified by real labor market deterioration, but political pressure has created a credibility overhang the Fed can’t ignore.

👉 CTA: Do you think this cut was timely insurance — or the start of a policy mistake? Share your view 👇