Why Trump's Call For The Fed To Cut Interest Rates May Not Help Consumers

President Donald Trump is badgering the Federal Reserve to cut interest rates, but even if the Fed gave in to the pressure, it wouldn't necessarily lead to lower borrowing costs for consumers.

In fact, economists say, Trump's ongoing attacks on Fed Chair Jerome Powell and his tariff policies could keep the longer-term interest rates that matter for consumers and businesses higher than they otherwise would be. A less-independent Fed can lead, over time, to higher borrowing costs, as investors worry that inflation may spike in the future. As a result they demand higher yields to own Treasury securities.

Trump has repeatedly urged Powell to cut the short-term interest rate that the central bank controls. The Fed typically reduces its rate during an economic downturn to encourage more borrowing and spending, and raises it to cool the economy and fight inflation when prices rise.

But long-term rates on things like mortgages , auto loans, and credit cards are largely set by market forces. And in recent weeks, fears that Trump's sweeping tariffs could raise inflation, along with the administration's threats to the Fed's independence , have led markets to push those longer term rates higher. It's not clear that the Fed can fully reverse those trends by itself.

"It's not automatically true that even if the Fed were to cut rates, that you would see a measured decline in long-term interest rates," Francesco Bianchi, an economist at Johns Hopkins University, said. "This kind of pressure on the Fed might backfire...if markets don't believe the Fed has inflation under control."