Despite President Trump ramping up pressure on Federal Reserve Chair Jerome Powell to cut interest rates, the Fed held rates steady at 4.25% to 4.5% on Wednesday, July 30. Trump has been insistent on a major cut all the way down to 1%.
Those who support the idea argue that a lower rate would reduce borrowing costs for consumers, mortgages, auto loans and corporations. Governors Michelle Bowman and Christopher Waller voted against the rates, the first time since 1993 that multiple governors voted against a rate decision.
But critics, including economists, former Fed officials and business leaders, warn that such heavy-handed interference in monetary policy could backfire, risking higher inflation, market instability and long-term damage to the Fed’s independence.
Here’s what Trump’s push could mean for your job prospects, investments and savings, and why experts say it’s not that simple.
While Trump is pressuring the Fed to slash the federal funds rate, some experts argue that bond yields are far more important to the broader economy.
In an interview with Fox Business earlier this year, Treasury Secretary Scott Bessent said the administration is paying closer attention to the 10-year Treasury yield, not the fed funds rate.
That distinction matters. The Fed funds rate primarily affects short-term borrowing — like credit cards and personal loans. But long-term borrowing, including mortgages and auto loans, is more closely tied to the yield on government bonds.
For example, over the past year, even as the Fed cut its policy rate from 5.5% in September 2024 to 4.5% by August 2025, mortgage rates didn’t follow suit. That’s because bond yields have climbed, pushing borrowing costs higher, according to The Wall Street Journal.
In fact, many economists warn that if the Fed cuts rates too quickly, bond yields could rise even further, potentially driving up mortgage rates and undermining the very goal of making borrowing cheaper.
In an interview with the Harvard Gazette, Daniel Tarullo, Nomura Professor of International Financial Regulatory Practice at Harvard Law School and former Federal Reserve governor, warned that Trump’s efforts to pressure or potentially remove Fed leadership could be deeply counterproductive.