Trump pushes Fed for lower rates, but consumers may be better off with a hike, experts say

The Federal Reserve has held rates steady this year while inflation remains above its 2% target. Ahead of its Sept. 15-16 meeting, President Donald Trump and senior administration officials are urging the central bank not to raise rates, or to lower its benchmark. Fed funds futures recently priced a 60% chance of a quarter-percentage-point hike, according to CME Group’s FedWatch tool. Higher rates would raise borrowing costs for consumers, but tighter policy can restrain spending and borrowing, cool economic activity and reduce pressure on essentials such as groceries and gas. The meeting comes weeks before the November midterm elections, as voters remain dissatisfied with elevated prices and borrowing costs. The ongoing war with Iran and bond-market volatility add to household strain, particularly for middle- and lower-income families, Mark Hamrick, economic analyst and founder of The Hamrick Brief, said. Mark Higgins, senior vice president at Index Fund Advisors and author of “Investing in U.S. Financial History: Understanding the Past to Forecast the Future,” said cutting rates too soon could undermine the effort to restore price stability. He favors maintaining sufficiently restrictive policy until inflation is decisively contained. A hike would make consumer debt more expensive. Short-term rates on products including car loans and credit cards generally track the prime rate, typically three percentage points above the federal funds rate. Fifteen- and 30-year fixed mortgage rates instead respond to Treasury yields, inflation expectations and broader economic conditions. As oil prices intensified inflation concerns, the 10-year Treasury yield briefly exceeded 4.8%, while the average 30-year mortgage rate reached 6.89%, according to Mortgage News Daily. Mark Zandi, chief economist at Moody’s, said a politically driven cut could push fixed mortgage rates—already above their pre-war level of below 6%—well above 7%. Business and commercial-property borrowing costs could also rise, while equities could come under pressure. Zandi said a cut could signal that the Fed had lost independence, increasing future inflation risks. Hamrick said preserving credibility matters because inflation expectations can reinforce wage and price increases. Trump has also criticized former Chair Jerome Powell, while Kevin Warsh is Fed chairman.