Trump Escalates Fed Attacks with Credit Card Rate Cap Threat as Markets Await December CPI Data

Trump Administration Targets Federal Reserve

The Trump administration has intensified its criticism of the Federal Reserve, with President Trump threatening to cap credit card interest rates at **10% for one year**. This follows reports of the Department of Justice serving subpoenas to the Fed related to Chair Jerome Powell's congressional testimony on a $2.5 billion office renovation project[2][4].

Fed Chair Powell has pushed back against the attacks, amid a 'Sell America' trade resurfacing on Wall Street due to escalating tensions[4]. Trump has also expressed inclination to exclude Exxon from Venezuela-related measures, adding to policy uncertainties[4].

December CPI Data Looms Large

Economists expect December consumer prices to rise **2.6% year-over-year**, down slightly from 2.7% in November, with monthly prices up 0.3%[2]. The data, due this week, comes after government shutdown distortions affected prior months' figures, providing clearer insights into inflation trends[1][2].

Gas and used car prices fell, signaling easing pressures, but electricity, groceries, and clothing costs likely increased, keeping inflation above the Fed's **2% target**[2]. Fed officials remain divided on further rate cuts, with the key rate at about 3.6% after a December quarter-point reduction[2].

Market Reactions and Fed Policy Outlook

• Wall Street shows angst, with bank stocks like Citigroup, Visa, Mastercard, and American Express declining amid Trump's rate cap threats[4].
• Investors anticipate no rate cuts until June, despite recent 25 basis-point reductions at three meetings[1].
• ING economists predict at least two cuts in 2026, citing falling energy prices, slowing rents, and wage growth[3].

The Fed balances inflation control with labor market support, as unemployment data recently improved unexpectedly[3]. Powell noted tariffs' inflation impact may peak in Q1 2026 before subsiding[3].

Broader Economic Releases This Week

Key US data includes retail sales, industrial production, and producer prices[1]. Markets watch for labor market signals amid prior subdued PMI readings and modest growth[1].

Trump's rhetoric aims to lower mortgage and government borrowing costs, though the Fed does not directly set mortgage rates[2]. Banks brace for earnings amid policy shifts[4].

Implications for Consumers and Investors

A credit card rate cap could pressure bank profits but offer relief to consumers facing high borrowing costs. Equity markets reflect improved risk appetite from expected policy easing, per S&P Global's Investment Manager Index[1].

Global events, like UK GDP and South Korea's rate decision, add context, but US inflation remains the focal point[1][3].