Moneywise and Yahoo Finance LLC may earn commissions or income through links in the content below.
If anything has remained constant during President Donald Trump’s first and second terms, it is his pressure on Federal Reserve Bank Chairman Jerome Powell to lower interest rates.
Last July, Trump talked about firing (1) Powell, and the Justice Department announced plans to launch a criminal investigation into him. A judge blocked (2) the investigation (twice), but Powell saw it as direct political pressure to lower interest rates.
Top picks
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will benefit the public, rather than following the president’s preferences,” Powell said in a January 2026 statement (3).
But it’s not even that Powell hasn’t lowered rates. Between September 2024 and December 2025, the Federal Reserve’s official overnight lending rate fell (4) 1.75%, with three cuts at the end of last year alone. It currently stands (5) at just over 3.6%.
The White House would like to see it even lower. Trump has called for (6) a rate as low as 1%.
Now, Powell and the Federal Reserve staff are grappling with what they see as a bigger threat than Trump: inflation.
Beth Hammack, president of the Federal Reserve Bank of Cleveland, told the Associated Press how inflation could force the Federal Reserve to increase rates instead of reducing them (6).
“I can see where we might need to raise rates if inflation remains persistently above our target,” he said.
How inflation may force the Federal Reserve to intervene in interest rates
The Federal Reserve Bank is mandated by Congress to maintain high employment and low inflation, with a target inflation rate of 2% (7). Inflation fell to 2.4% in January 2026, 0.6% lower than when Trump took office in 2025.
“Inflation has been above our target for more than five years,” Hammack (6) told the Associated Press.
Now, the Iran war (and its impact on gas prices and global supply chains) is exacerbating the situation. At the end of April, gasoline prices remained above $4 a gallon on average, up 30% due to the Iran war, CNBC reports (8).
A new report (9) from the Organization for Economic Cooperation and Development (OECD) predicts that the United States could have inflation of 4.2% by the end of the year, the highest in the G7. As of March, the United States is not far away either. Inflation, as measured by the Bureau of Labor Statistics’ consumer price index, stood at 3.3% year over year (10).
The best lever the Federal Reserve has to reduce inflation is to raise interest rates. Higher interest rates suppress demand, making it more expensive to get a loan, buy a car, or buy anything on credit. That cools the economy.
Hammock’s counterpart in Chicago, Austan Goolsbee, said that if inflation continues to rise while unemployment is low, the Federal Reserve might have to raise interest rates.
“There’s an obvious playbook: Rate increases should be on the table,” he told the Associated Press.
Hammock added that he would like to see the Fed’s benchmark rate remain stable “for quite some time.”
This is because the Federal Reserve walks a tightrope between inflation and employment. High gas prices not only drive inflation, they can also hurt employment and lead to layoffs.
Although Donald Trump continues to urge lower rates, his nominee to lead the Federal Reserve, Kevin Warsh, says monetary policy will not be driven by politics.
“The president never asked me to commit to any particular interest rate decision, period,” Warsh told the US Senate Banking Committee (11). “Nor would I agree to do it if I had done it. I will be an independent player if I am confirmed as chairman of the Federal Reserve.”
Some market veterans argue that now is not the time to ease policy. Ray Dalio, founder of Bridgewater Associates, believes cutting rates now could undermine the credibility of the Federal Reserve.
“We are certainly in a stagflationary period,” Dalio said in an interview with CNBC (12).
“They certainly wouldn’t cut interest rates now, they would lose their credibility. The Federal Reserve would lose its credibility, particularly now,” he added.
Read more: Robert Kiyosaki warned of a “greater depression,” in which millions of Americans will become poorer. Was he right?
Prepare your finances now
In this uncertain context, traders are increasingly betting that the Federal Reserve will keep rates stable. According to the CME Group’s FedWatch tool, markets are currently pricing in a 100% chance that policymakers will leave rates unchanged at their next meeting, and federal funds futures suggest policy could remain unchanged for the rest of the year (12).
Since borrowing costs are likely to remain elevated for now, it may be a good time to take a closer look at your finances. If you have high-interest debt, particularly credit cards, rising interest costs could mean that more of your monthly payments go toward interest rather than reducing your balance.
If you have several high-interest debts and are struggling to pay them off, consider consolidating your balances into a personal loan through Credible. This way, you will only have one fixed monthly payment, making payment much easier.
Through Credible’s online marketplace, finding the right loan is much easier. Credible lets you shop around for the lowest interest rates with just a few clicks. In less than three minutes you will see all the lenders willing to help you pay your credit cards or other debts with a single personal loan.
Earn returns on your uninvested cash
There is a silver lining to higher interest rates: Your idle cash can generate significant returns through a high-yield account. These accounts typically offer significantly higher rates than traditional checking or savings accounts, allowing your money to grow quietly in the background while still being easily accessible.
A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering competitive interest rates and easy access to your money when you need it.
A Wealthfront Cash account currently offers a base APY of 3.30% through program banks, and new customers can get an additional 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.
That’s ten times the national savings and deposit rate, according to the FDIC’s March report.
Additionally, Wealthfront is offering new customers who allow direct deposit ($1,000/month minimum) into their Cash account and open and fund a new investment account an additional 0.25% APY boost with no expiration date or balance limit, meaning your APY could be as high as 4.30%.
With no minimum balances or account fees, plus 24/7 withdrawals and free domestic bank transfers, your funds remain accessible at all times. Additionally, you gain access to FDIC insurance eligibility of up to $8 million through program banks.
Block rates
While mortgage rates are expected to remain elevated, borrowers still have options to reduce their costs. Comparing prices can make a surprisingly big difference.
According to LendingTree (13), you could save an average of $80,024 over the life of a mortgage by shopping around and choosing the best rate available.
Platforms like Mortgage Research Center can help you research rates offered by reputable lenders near you for free, all from the comfort of your home.
All you have to do is answer a few basic questions about your property and your finances (including your annual income and credit score), and Mortgage Research Center will compile a list of the best deals from lenders near you.
You can also connect with personalized mortgage offers from lenders and schedule a free introductory call with no obligation to contract.
Consult a fiduciary
If navigating the current economic uncertainty feels overwhelming, it may be worth seeking professional guidance.
You can easily connect for free with a FINRA/SEC licensed financial advisor near you through Advisor.com. Each advisor in your network is a fiduciary, meaning they are legally obligated to act in your best interest.
All you have to do is answer a few questions about your financial situation and Advisor.com will connect you with a qualified expert.
Even better, Advisor.com allows you to schedule a free, no-obligation initial consultation to see if your match is right for you before you make a decision.
— With files from Laura Boast
you may also like
Join over 250,000 readers and get the best Moneywise exclusive stories and interviews first – clear insights curated and delivered weekly. Subscribe now.
Article sources
We rely only on verified sources and credible third-party reports. For more details, see our Ethics and editorial guidelines..
NPR(1); Barron (2); Federal Reserve(3); CNN(4); Federal Reserve Bank of New York(5); Associated Press(6); Federal Reserve(7); CNBC(8), (12); OECD(9); Bureau of Labor Statistics (10); AP News (11); Loan tree (13)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
