On August 12, 2025, President Donald Trump renewed his calls for a dramatic interest rate cut — urging the Federal Reserve to slash rates to just 1% or even lower. With the current benchmark rate sitting between 4.25% and 4.50%, such a move would mark one of the sharpest monetary policy shifts in modern U.S. history. Supporters say lower rates could boost growth and reduce borrowing costs, while critics warn it could reignite inflation and threaten central bank independence.

In this post, we break down why Trump is pushing for a 1% Fed rate, the potential economic impact, and what might happen next.

📉 Current Interest Rate Environment

The Federal Reserve has maintained elevated rates since 2022 to fight persistent inflation, aiming for its 2% target. As of mid-2025, inflation remains above target but has cooled from its peak.

• Current Fed funds rate: 4.25% – 4.50%

• Inflation: Moderating but still a concern

• Goal: Keep prices stable while avoiding recession

For Trump, however, these rates are “way too high,” arguing that they slow growth and put unnecessary strain on businesses and consumers.

💡 Why Trump Wants Rates at 1%

Trump’s push for a 1% interest rate appears to be driven by three main motives:

1. Lower Government Borrowing Costs
   With national debt exceeding $35 trillion, lower rates could ease the federal government’s interest payment burden, freeing up funds for other spending priorities.

2. Stimulating Economic Growth
   Cheap borrowing encourages businesses to invest and consumers to spend, potentially boosting GDP ahead of the 2026 election cycle.

3. Political Pressure on the Fed
   Trump has repeatedly clashed with Fed Chair Jerome Powell, even suggesting he might replace him before his term ends. Installing a chair aligned with his monetary policy vision could help push through rapid rate cuts.

⚠️ Risks of a 1% Interest Rate

Economists warn that cutting rates too quickly could backfire:

• Inflation Surge: Cheap borrowing can drive demand higher, risking another wave of price increases.

• Market Volatility: Sudden shifts in monetary policy could spook investors and destabilize bond markets.

• Weakened Fed Credibility: Political interference undermines trust in the Fed’s independence, potentially harming long-term stability.

History offers cautionary tales — in the 1970s, political pressure on the Fed to keep rates low contributed to runaway inflation.

🏛️ Fed’s Response

Fed Chair Jerome Powell has so far resisted Trump’s demands, emphasizing data-driven decisions rather than political pressure. The central bank’s mandate — balancing price stability with maximum employment — remains its guiding principle.

However, Trump has hinted at nominating new Fed governors sympathetic to his approach, potentially reshaping the board’s stance on rate cuts in the coming months.

🔮 What Happens Next?

The next few months could be decisive:

• If inflation continues to cool → The Fed may consider gradual cuts, though nowhere near Trump’s proposed 1% level.

• If economic growth slows → Pressure for bigger cuts could grow, boosting Trump’s argument.

• If political tensions rise → Fed independence could face unprecedented challenges.

📌 Bottom Line

Trump’s call for 1% interest rates is bold, politically charged, and economically risky. While lower borrowing costs might give short-term relief to businesses and consumers, history suggests that aggressive cuts in an inflation-prone environment could have long-term costs.

For now, all eyes are on the Federal Reserve, the White House, and the latest economic data to see whether this tug-of-war ends in compromise or confrontation.

In a recent appearance on CNBC’s Crypto World, Representative Sam Liccardo expressed serious concerns about the path forward for the long-awaited Crypto Market Structure Bill as it moves to the U.S. Senate. Despite the bill’s momentum in the House, Liccardo emphasized that several hurdles remain before it can become law — hurdles that reflect deeper divisions in Washington’s approach to regulating digital assets.

A House Victory, But a Rocky Road Ahead
The House of Representatives recently passed the bipartisan Crypto Market Structure Bill, which aims to provide clearer regulatory frameworks for digital assets, particularly distinguishing the roles of the SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission). The legislation is designed to create legal clarity for crypto companies, investors, and innovators — a move many in the industry see as long overdue.

However, Rep. Liccardo, a known advocate for balanced crypto regulation, cautioned that the Senate may not be as welcoming to the bill’s provisions.

“We have alignment in the House, but the Senate has its own priorities and skepticism,” Liccardo stated. “There’s real work to do to get both parties comfortable with how this bill shapes oversight and investor protections.”

Key Challenges in the Senate
Liccardo pointed to several factors that could stall the bill’s progress in the upper chamber:

Partisan Divides: While the bill had bipartisan backing in the House, the Senate has seen more division on how to classify crypto assets — whether they should fall under securities laws or commodities regulation.

Investor Protection Concerns: Some senators remain concerned that the bill might favor innovation over consumer protection, especially in the wake of high-profile crypto collapses like FTX and Celsius.

Lobbying Pressure: Both pro-crypto and anti-crypto lobbying groups are exerting pressure on senators, complicating the legislative landscape.

Presidential Election Shadow: With the 2024 U.S. elections nearing, many lawmakers are hesitant to take bold stances on emerging technologies like crypto, fearing political backlash or being seen as either too lenient or too harsh on regulation.

Industry Implications
If the bill faces delays or rejection in the Senate, it could mean prolonged regulatory uncertainty for crypto businesses operating in the U.S. Currently, many companies are caught between conflicting interpretations of existing financial laws. The lack of clarity has already pushed some blockchain innovators overseas to more crypto-friendly jurisdictions.

However, a positive outcome in the Senate could usher in a new era of legitimacy for the crypto industry, providing a unified framework for compliance and investor confidence.

What Comes Next?
Liccardo urged the crypto community and lawmakers to remain engaged and open to compromise. “The perfect bill doesn’t exist. But we can’t let the perfect be the enemy of the good,” he noted.

In the coming weeks, Senate hearings, committee discussions, and behind-the-scenes negotiations will determine the bill’s fate. For now, the crypto world is watching Washington closely — with cautious optimism and a deep awareness of the stakes involved.

Final Thoughts
Rep. Liccardo’s warning is a timely reminder that while the crypto industry continues to evolve rapidly, regulatory progress remains slow and complicated. Whether the Senate will embrace a future-forward approach or stall in the name of caution will have significant consequences — not just for investors, but for the global standing of the U.S. in the digital economy.

Stay tuned to Crypto World and trusted updates to see how this crucial policy battle unfolds.