Trump has promised lower interest rates. That will be largely out of his control.
While Trump has sought to pressure the Fed to cut rates, consumer rates on mortgages and other loans are determined by a range of factors largely outside of the president’s control.
WASHINGTON — As a candidate, Donald Trump promised to relieve consumers of high interest rates. As president, doing so will likely be a slow process largely outside of his control.
Trump repeatedly said during the campaign that he would bring down interest rates without elaborating on how. He has suggested the president should have a say in determining rates set by the Federal Reserve and publicly berated the central bank and its chairman, Jerome Powell, for not lowering rates sooner.
But while Trump has put a lot of emphasis on the Federal Reserve as a way to reduce the interest paid by consumers or businesses, the rates on mortgages and other longer-term loans are outside of any one person’s or institution’s control. Instead, those rates are largely determined by the bond market, where investors are looking at a range of long-term risks, like the likelihood of high inflation returning, prospects for economic growth and the United States’ ability to pay back its debts in the decades to come.
“I think macro trends are way more important,” said Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania Wharton School. “I just don’t think the Federal Reserve has a lot of control like they used to.”
The Federal Reserve plays a part in influencing interest rates by setting the amount that banks have to pay short term to borrow money from each other in order to carry out their daily business. That amount can trickle down to how much lenders then charge consumers for a loan, but it isn’t always the case.
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