You just don’t see a lot of drama in the Federal Reserve. In normal times, that is.

But 2025 wasn’t normal. That is: normal in the way that, say, 2023 and 2024 were normal. In 2025, Donald Trump started a new term as president. He promptly started jacking up tariff rates with such ferocity that the Standard & Poor’s 500 Index fell 10.5% in two days. (And rebounded more than 42% to the end of the year.)

He sent out government employees to detain and deport undocumented workers. (The goal is 1 million in 2026) He made massive cuts in the federal workforce.

He bombed Iran and started to attack suspected narco boats in South America.

So, no, not a normal year. And maybe not in 2026.

Trump goes after the Fed hard

And, as he did in his first term, President Trump went back to complaining about the Federal Reserve and its interest-rate policies.

The Fed needed to cut rates now (or sooner), he said: in online posts, in news conferences and just about any other place that gave him a microphone.

He complained that the Fed was too slow. Jerome Powell, the Fed chairman, was incompetent. He said he might fire Powell, but the law on whether a President can fire the chairman is unclear. So Powell stayed on, making clear litigation was highly likely in the event of a dismissal.

Related: Fed interest rate cut bets shift for January

Trump this week said he might sue Powell for gross incompetence over the ballooning costs of a new Fed building. But “might sue” isn’t the same thing as actually filing a lawsuit.

He did announce he had fired Fed Governor Lisa Cook for cause, alleging she had committed mortgage fraud. Cook sued, and the case is still in the courts. (ProPublica reported on Dec. 8 that Trump has engaged in the same activities as Cook.)

Powell’s four-year term expires May 15. He has been clear that he’s done with the job.

Trump is looking at four candidates and has said he would announce a winner in January.

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But rates have come down

And what has Powell done through all this tumult? He did his job. The Fed cut its key federal funds rate three times during the year, bringing the rate down to 3.5% to 3.75%. (The rate is the starting point for short-term U.S. interest rates and influences overall rates.)

And interest rates did, in fact, come down.

The 10-year Treasury yieldfell from a high of 4.817% on Jan. 14, 2025, to 4.172% on Wednesday. The yield briefly hit 3.9% on Oct. 22. Mortgage rates dropped from roughly 7.2% in January to 6.2% as of Wednesday, according to Freddie Mac data.

Related: The major stories that moved stocks in 2025

Housing activity, stagnant at best since 2022, stirred a little in 2025. While rates have been a problem, the bigger problem is too little housing available. That’s a function of sky-high prices for existing homes and the complicated, pricey realities of trying to develop and build new homes.

Oh, and the stock market, Trump’s favorite gauge of economic success, ended 2025 with a third straight year of double-digit gains. The Standard & Poor’s 500 index was up 16.4% for the year, following a 12.9% gain in 2024 and a 13.7% gain in 2023.

But the index closed the year down 1.1% from its all-time high of 6,920 reached on Oct. 29. And stocks generally fell on Wednesday, the last trading day of 2025. The S&P 500 was off 0.7% on the day. Real estate was the weakest sector. Home builders D.R. Horton, Lennar and home-improvement giant Home Depot were all lower.

The U.S. dollar did come down in 2025, about 9.4% against major currencies. Good for exports. But a falling dollar makes imports more expensive, and more so because of all the tariffs. That adds to inflation pressures.

Bitcoin and crypto, which the president promotes, have generally hit a roadblock. Bitcoin fell 4.2% in December and 6.3% for the year. The close was down 15.5% from Inauguration day.

Here’s what could happen next

President Trump still must nominate a new Fed chair, who would take over in May. The four candidates have decent credentials:

  • Kevin Warsh is a former Fed governor.
  • Kevin Hassett is the chairman of Trump’s National Economic Council and was once a Fed economist.
  • Christopher Waller is a Fed governor.
  • Rick Rieder is chief investment officer of fixed income at BlackRock, the giant investment management firm.

As of Dec. 31, Hassett and Warsh were the favorites on the Kalshi platform to get the job.

The nominee will still need Senate confirmation. But after getting the job comes the hard part: Not cutting rates if Trump demands it, as The Wall Street Journal‘s Greg Ip noted recently.

Related: Nvidia’s $20 billion Groq play is a blueprint for 2026

Trump told Politico “he would only pick someone . . . who is committed to cutting interest rates immediately. ” (Trump would love to see the Fed Funds rate fall to as low as 0.5%.)

Yet U.S. and global bond markets may rebel, and their influence can not be ignored. When the Fed first cut rates in October 2023, bond yields went up.

Trump has many other things on his plate: fighting narco terrorists, Democrats, Europe, deporting undocumented workers and trying to remake all of American culture.

Related: Stock Market Today, Dec. 31: Stocks Slide To Cap Off Record-Breaking 2025

He may decide to let the Fed do what the Fed is supposed to do: Promote full employment and keep inflation at bay.

But if you’re a Fed watcher, it may be best to follow the advice Bette Davis offered in the classic film “All About Eve”:

“Fasten your seatbelts. It’s going to be a bumpy night.”