US President Donald Trump’s trade tariffs have sparked concerns over rising inflation, with the US Federal Reserve (Fed) becoming less likely to cut interest rates in the near future. The latest inflation data showed a 30 basis point rise, marking the fastest increase in a century, according to UBS.
Trump tweeted that consumers are experiencing “Low Prices” and urged the Fed to lower interest rates by 3 points. However, the direction of inflation is now making it less likely for the Fed to deliver rate cuts. In fact, the odds of a September rate cut have dropped from 75% to 50%.
Economists attribute the rising prices to Trump’s trade tariffs, with core goods prices excluding autos increasing by 0.5%. The tariff costs are expected to continue to rise in July, potentially leading to broader inflation across the consumer basket.
The weak US dollar is also importing inflation, as American money becomes weaker. This has led to higher prices abroad and increased borrowing costs for the US government. As a result, US Treasury yields have risen, pushing the 30-year yield above 5%.
The Fed’s decision-making process involves 12 members, plus regional bank representatives, who are supported by hundreds of researchers and economists. While Trump can try to influence the outcome, it is unlikely that they will roll over and cut interest rates if they know inflation is eroding the value of American money.
From a stock market perspective, cheap money is not in demand due to Trump’s tariff policy, which is forcing the Fed to raise interest rates instead. The prospects of rate cuts are now receding, and investors should expect prices of imported goods to rise further as new tariffs kick in.
Source: https://fortune.com/2025/07/16/stocks-sell-off-investors-trump-inflation-pipeline-fed-hold-off-interest-rate-cuts