LONDON, June 17 (Reuters) - Even if the Federal Reserve thought a window had opened for it to resume its interest rate cutting campaign, there's a risk it may now hold back, precisely because of the relentless political pressure President Donald Trump has put on it to ease policy.

And that's not just Fed Chair Jerome Powell being stubborn.

One of its key concerns at this stage of its monetary policy cycle is that markets, businesses and households will not believe it has the staying power or political support to wring out the last vestiges of excess inflation and bring inflation expectations back durably to its 2% target.

A rate cut as soon as this week - especially with futures markets not pricing in another one until September - would stoke suspicion that the move was forced by the White House.

Repeated calls from Trump for the Fed to immediately lop as much as a full percentage point off its policy rate are now essentially weekly - if not daily - exhortations.

Trump has claimed he won't fire the Fed chair, whose term ends early next year, and a recent Supreme Court ruling indicates that he would not be legally allowed to do so. Yet the political pressure on the Fed to ease policy continues to ratchet higher.

Trump summoned Powell to a meeting at the White House late last month to tell him he needed to cut rates. That prompted a hasty Fed statement underlining the institution's political independence and it insisted that the Fed chair did not discuss interest rate plans with the president.

Trump followed this by claiming his nomination for Powell's successor would be "coming out very soon", adding that former Fed Governor Kevin Warsh was "very highly thought of".

And then last week he said that even though he would not fire Powell, he "may have to force something".

What's clear is that this pressure is unlikely to abate and is apt to go up several decibels every time there's a soft inflation or labour market reading, both of which we saw last week. Other G7 central banks cutting rates will also likely turn up the dial.

The Fed's best defence is that "core" annual inflation rates - both the consumer price index and the Fed-favoured personal consumption expenditures gauge - remain at 2.5% or higher.

Line graph showing various measures of inflation and the Federal Reserve's policy rate of interest.

The ongoing trade war threatens to push up import prices, while "hot wars", such as the raging Israel-Iran conflict, raise the prospect of higher energy prices globally.

The picture is foggy at best and the Fed will almost certainly hold rates steady again this week while assessing the situation.

Line chart of Fed uncertainty survey.

RATE EXPECTATIONS

But perhaps more worrying for the U.S. central bank is elevated inflation expectations. U.S. consumer inflation expectations over five years remain somewhere between 2.6% and 4.1%, according to monthly New York Fed and University of Michigan surveys respectively.

Amid tariff chaos public worry about future of prices lessens

UMich inflation expectations

Markets are only marginally more optimistic, with the five-year "breakeven" rate from the inflation-protected Treasury market and the five-year inflation swap at 2.3% and 2.5%, respectively.

Over a 10-year horizon, markets see the U.S. inflation outlook as the worst of the G7.

In short, the Fed has not yet convinced households or financial markets that it will get inflation back to its target over the medium term.

So even if a cogent argument could be made for lowering borrowing rates at this juncture, such as concerns about the trade war's impact on economic activity, the Fed may not respond for fear of stoking those very expectations by appearing to be giving into political pressure.

And allowing above-target inflation concerns to get embedded over time risks entrenching higher risk premia into long-term bonds and weakening the dollar longer term by suggesting investors might not be adequately compensated for inflation erosion over time.

Fed independence and credibility are much more important than the timing of any given policy move, and that's an argument that both Powell and Fed officials make repeatedly.

"It is absolutely critical that decisions on monetary policy be free of external noises and influences," Philadelphia Fed President Patrick Harker said this month.

The question then is just how much worse the jobs picture would have to get, or how much deeper inflation would have to fall, for the Fed to be confident that a rate cut would not raise suspicions of political pressure.

Meanwhile, speculation about Trump's willingness and ability to remove Powell still rumbles, despite the recent Supreme Court ruling.

University of California, Berkeley Professor Barry Eichengreen argues the footnote in the court ruling that supposedly protects the Fed came with no legal basis.

"The note reads like a ChatGPT hallucination," he wrote in a piece for Project Syndicate last week, adding "arbitrarily exempting the Fed opens the door to arbitrarily not exempting the Fed."

"Advocates of Fed independence should be worried", he concluded.

To prove its independence, the Fed may have to sit on its hands longer than it would have otherwise.

The opinions expressed here are those of the author, a columnist for Reuters.