Why Trump’s Push To Lower Mortgage Rates Could Backfire

President Donald Trump's pressure on the Federal Reserve to cut interest rates may inadvertently drive mortgage rates higher, economists warn. The Fed's benchmark rate influences short-term borrowing costs, but mortgage rates are tethered to long-term inflation expectations—which could spike if markets perceive rate cuts as politically motivated.

Historical data contradicts Trump's assumption that lower Fed rates reduce government borrowing costs. Since the last Fed cut, long-term Treasury yields have risen, compounding budget deficits rather than alleviating them. The housing market faces similar headwinds: artificially suppressed rates risk reigniting inflation, pushing home financing costs beyond reach for many buyers.

This economic Catch-22 exposes the limitations of political interference in monetary policy. When central bank decisions appear subordinated to electoral agendas, investors demand higher premiums for inflation risk—a dynamic that could neutralize any intended stimulus from rate reductions.