Fed Walks Tightrope as Trump Pressures Rate Cuts Amid Inflation Fears

The Federal Reserve's policy-making Federal Open Market Committee (FOMC) is poised to announce a 25-basis-point rate cut at its two-day meeting on October 28–29, 2025, as economic indicators point to a cooling labor market and subdued inflationary pressures. This move would mark the second reduction of the year, following a similar cut in September, and would bring the federal funds rate to a target range of 3.75%–4%, according to a Yahoo Finance analysis. The decision comes amid a broader economic landscape where manufacturing and retail sales data—key indicators to be released next week—could influence the trajectory of future rate adjustments, per the Investing.com economic calendar.

The anticipated rate cut is expected to provide limited relief to consumers, particularly in the mortgage market. While the 30-year fixed-rate mortgage averaged 6.34% as of October 2, down from 7.04% in January, experts caution that long-term rates remain anchored by high Treasury yields and inflation expectations. "Mortgage rates aren't directly tied to the Fed's policy rate, but they still reflect investor sentiment on inflation and economic growth," said Ted Rossman, a senior industry analyst at Bankrate.com. Economists like Kara Ng of Zillow Home Loans predict that rates may inch lower through 2026 but remain "confined" to the 6%–7% range for now.

Credit card holders, however, are unlikely to see meaningful benefits. The average credit card rate stands at 20.03%, down slightly from 20.12% in September, but a quarter-point cut would only marginally reduce borrowing costs. "A 0.25% cut won't significantly impact credit card rates for most consumers," Rossman noted, adding that variable rates for existing cardholders typically adjust one to two billing cycles after a Fed move. Auto loan rates, which edged down to 7.12% for new vehicles in late October, may see further declines if the Fed continues its easing path. Jonathan Smoke of Cox Automotive, however, expects minimal movement until year-end incentives from automakers kick in.

The Fed's decision also carries political weight. President Donald Trump has publicly pressured the central bank to cut rates more aggressively, while Fed officials grapple with the risk of inflation reaccelerating due to higher tariffs and immigration policies. "The Fed is walking a tightrope," said economist Sung Won Sohn, noting that premature cuts could undermine confidence if inflation resurges or the economy weakens further.

Looking ahead, Fed funds futures market data suggest a further 1% reduction in short-term rates by the end of 2026, with long-term rates expected to decline modestly. For mortgage-backed securities firms like Armour Residential REIT (ARR), this environment could translate to higher distributable earnings as repo financing costs fall, according to a Seeking Alpha article. ARR's preferred shares, currently trading at an 8.06% yield, may see capital appreciation if long-term rates drop by 0.2–0.4%, analysts estimate.