President Trump is pressuring the Federal Reserve to cut interest rates, but experts warn that even if the Fed complies, it may not result in lower borrowing costs for consumers. Trump’s attacks on Fed Chair Jerome Powell and his tariff policies could actually keep longer-term interest rates higher, as investors fear future inflation. Trump has urged Powell to reduce the short-term interest rate, which the Fed controls, but market forces largely determine long-term rates. Trump’s threats to the Fed’s independence have led to market volatility, with yields rising on the 10-year Treasury bond, impacting mortgage rates.
Despite Trump’s call for rate cuts, the Fed is cautious and wants to evaluate the impact of Trump’s policies before making any moves. Inflation has decreased, but core prices remain high. The economy has changed significantly since Trump took office, and tariffs are likely to raise prices temporarily. Fed officials may delay rate cuts due to political pressure from Trump and the inflation threat. It may take more than a few rate cuts to bring down longer-term borrowing costs and stabilize the economy.
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