Trump and Fed Chair Powell could be set on a collision course over interest rates

President-elect Donald Trump and Federal Reserve Chair Jerome Powell could be on a policy collision course in 2025 depending on how economic circumstances play out.

Should the economy run hot and inflation flare up again, Powell and his colleagues could decide to tap the brakes on their efforts to lower interest rates. That in turn could infuriate Trump, who lashed Fed officials including Powell during his first term in office for not relaxing monetary policy quickly enough.

"Without question," said Joseph LaVorgna, former chief economist at the National Economic Council during Trump's first term, when asked about the potential for a conflict. "When they don't know what to do, oftentimes they don't do anything. That may be a problem. If the president feels like rates should be lowered, does the Fed, just for public optics, dig its feet in?"

Though Powell became Fed chair in 2018, after Trump nominated him for the position, the two clashed often about the direction of interest rates.

Trump publicly and aggressively berated the chair, who in turn responded by asserting how important it is for the Fed to be independent and apart from political pressures, even if they're coming from the president.

When Trump takes office in January, the two will be operating against a different backdrop. During the first term, there was little inflation, meaning that even Fed rate hikes kept benchmark rates well below where they are now.

Trump is planning both expansionary and protectionist fiscal policy, even more so than during his previous run, that will include an even tougher round of tariffs, lower taxes and big spending. Should the results start to show up in the data, the Powell Fed may be tempted to hold tougher on monetary policy against