Trump Pressures Fed to Cut Rates to Ease Housing Costs and National Debt Burden

Donald Trump has intensified his criticism of Federal Reserve Chair Jerome Powell, accusing him of stifling the housing market and urging the Fed to cut interest rates. While Trump has framed the issue as a matter of consumer hardship, experts suggest the move would also benefit the U.S. government, which is grappling with a $37 trillion national debt. Lower interest rates would reduce the cost of servicing this debt, easing pressure on the federal budget [1].

Trump’s argument is centered on the idea that high rates are making mortgages unattainable for many Americans. He has repeatedly called out Powell for what he sees as a disastrous economic policy, arguing that reducing the base rate could revitalize the housing market and relieve financial stress for families. The president’s rhetoric has gained traction in part because it aligns with public concerns over affordability and economic stability [1].

Professor Joao Gomes from Wharton’s Business School told Fortune that while Trump’s public narrative focuses on consumer relief, the real incentive for a rate cut may also stem from fiscal concerns. Gomes explained that a reduction in the base rate would lower borrowing costs for the government, which currently spends $1.013 trillion annually on interest payments—nearly 17% of federal spending. In July alone, $60.95 billion was spent on interest for various Treasury securities, according to data from the U.S. Treasury viewed by Fortune [1].

The potential for a rate cut is likely to grow as the Fed prepares for its next meeting in September. Trump has used the upcoming Jackson Hole Symposium as a platform to escalate his pressure, suggesting the Fed is overdue for a policy shift. His messaging is politically advantageous, as it positions him as an advocate for consumers while also addressing the underlying fiscal challenges facing the administration [1].

However, experts caution that the relationship between base rates and mortgage rates is not direct. While a rate cut could signal a shift in monetary policy, mortgage rates are influenced by a broader range of economic factors, including lender risk assessments and market expectations. Columbia University’s Professor Yiming Ma noted that a 0.25 basis point reduction may not significantly affect mortgage rates, which are also tied to long-term economic stability and inflation expectations [1].

For consumers, lower interest rates could bring some relief, particularly for those relying on credit cards. A study from the St. Louis Fed found that a significant portion of low-income individuals carry credit card debt, and even a modest rate reduction could ease their financial burden. However, many Americans also benefit from high-yield savings accounts that reward them with higher returns in a high-rate environment. Professor Ma noted that the financial impact of rate cuts is mixed, as they benefit borrowers while potentially harming savers [1].

The broader economic impact of lower rates is also debated. While easier borrowing can stimulate business activity and consumer spending, it may also contribute to inflationary pressures. Bankrate analyst Jeff Ostrowski suggested that the effects of rate cuts on consumer behavior are complex and not always straightforward. With many Americans investing in the stock market, the traditional concerns about savings rates may be less pronounced [1].

Ultimately, the push for lower interest rates serves multiple purposes for the Trump administration. It could stimulate the housing market, ease consumer borrowing, and reduce the government’s debt servicing costs. As the debate over monetary policy continues, the Fed faces increasing pressure to respond to a call that blends populist economic messaging with practical fiscal concerns [1].

Source: [1] Trump may want lower interest rates for consumers, but it sure is convenient for the national debt he’s creating, too (https://fortune.com/2025/08/20/national-debt-lower-base-rate-budget-trump-powell-pressure/)