Trump's new push for lower rates
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Interest rate cuts from the Federal Reserve aren't coming fast enough for President Trump. He's imposing policies to try to achieve easier money through other means.
Why it matters: Trump's push to address affordability concerns in recent days has largely focused on lowering borrowing costs for consumers — though without spelling out detailed policy levers.
- And even if efforts to lower mortgage and credit card rates succeed at lowering borrowing costs, their broader economic impact is uncertain.
State of play: Trump has announced two notable policies in recent days to ease the borrowing burden for consumers, both of which came via Truth Social.
- He ordered Fannie Mae and Freddie Mac to use their balance sheets to buy $200 billion worth of mortgage bonds, aimed at putting downward pressure on mortgage rates that could entice new homebuyers.
- That news rippled through bond markets last week and lowered rates.
- Trump also said that credit card rates should be capped at 10% for one year, beginning next week — though it's unclear whether banks would honor that demand without legislation or regulations that force them to.
Between the lines: In effect, Trump is attempting to go around the Fed to unilaterally make it cheaper for Americans to get a mortgage and spend on a credit card — perhaps undercutting the central bank in the midst of a historic pressure campaign to get rock-bottom rates.
- He is trying to do so, however, without either the work of pushing legislation through Congress or the onerous legal process of writing regulations.
- In theory, lower rates would be good news for the consumer. But the policies might backfire with economists and big banks warning that it could ultimately put the brakes on the economy.
The big picture: Indications of a potential Fannie and Freddie mortgage buying spree did help push mortgage rates below 6% last week, the lowest rate since 2023 — though it's unknown how limited that dip may be.
- Moreover, lower rates can also fuel housing demand, which could keep home prices elevated.
- Low mortgage rates in 2021, for example, created booming housing activity — but also bidding wars that pushed home prices up rapidly in the absence of enough new supply.
Zoom in: Economists and bankers warn that the negative effects of capping credit card rates would notably overshadow any positive effects, with consequences for consumer spending and the broader economy.
- "While lower [credit card rates] all else equal would free up income each month for consumers to spend, we expect this would be more than offset by the negative effects of less credit access," a team of economists at Morgan Stanley wrote in a note Tuesday.
- "Borrowers who have credit limits lowered or credit lines pulled completely would likely have to turn to more expensive financing options or cut back on discretionary spending," the economists added.
What they're saying: Citigroup's chief financial officer Mark Mason similarly warned about adverse effects, noting to reporters that a credit card cap "would likely result in a significant slowdown in the economy," according to Bloomberg.
The bottom line: Trump is acting alone to exert more control over the U.S. economy than has been seen in decades, including with borrowing costs. The economic effects — including improved affordability — are no guarantee.
