Trump's Policies Fuel Inflation, Clouding Rate Cut Prospects

The Federal Reserve is facing pressure from President Donald Trump to lower interest rates. Despite the stock market's strong performance, Trump continues to criticize the Fed for not slashing interest rates.

However, two of Trump's policies are contributing to higher inflation and making it difficult for the Fed to consider rate cuts. The president's tariff and trade policy has pushed consumer prices up, while the Iran war has led to a disruption in oil supplies and driven fuel prices higher.

The Federal Reserve is tasked with keeping inflation below 2%. However, under Trump's policies, inflation has risen to 4.2% - its highest level in three years. With interest rates already at 3.5-3.75%, the Fed may need to raise them further to combat inflation.

The potential for higher interest rates is a concern for Wall Street, particularly for companies that rely on cheap capital to fund their growth. If borrowing costs rise, it could slow down the AI data center build-out and force investors to rethink their valuations of AI stocks.