One thing, however, does not go according to the plan: interest rates. It is already under Trump’s skin.
Trump interest rates must be reduced Posted on social media On February 12. “Something should go alongside the tariffs.”
The markets do not see this in this way – and unlike many politicians, Trump abandons Washington, the markets cannot be intimidated. In fact, it can end up with high interest rates, stubbornly, the second time of Trump’s term.
The Federal Reserve defines short -term interest rates that often affect banks, and Trump has already trained at the Federal Reserve Chair. Trump blames the Federal Reserve for his failure to go to the high inflation that has rushed for two years starting in 2022, which is The Federal Reserve exploded When she chose to reduce prices at his last meeting in January.
What most consumers and companies care about are long -term rates such as those on real estate loans, car financing and business loans.
Short and long -term rates usually move in the same direction, which means that the Federal Reserve has some effect on borrowing rates that most people pay. But the markets also have an opinion. Since last September, long -term prices, which are represented by the return on treasury bonds for a period of 10 years, have increased by almost a percentage, although the Federal Reserve has reduced short -term rates by a similar amount.
The bond market does not explain itself, but investors rise at 10 years to reflect fears about future high inflation. These concerns appear in other data as well, such as Michigan University’s monthly consumer surveys, which show that consumers are increasingly believed that inflation will be higher than a year and five years from now.
There are two main reasons that can increase inflation.
The first is that the high prices in some spending categories, such as Housing, insurance and child careIt remains constantly high, along with Egg egg prices Because of the bird flu. Not a lot of Trump can do about it. The other reason is that companies and consumers expect that the Trump tariff will raise prices more than rising. There is something that Trump can do about it. But so far, he chooses not to.
The definitions are one of Trump’s favorite policy tools, and it applies it extravagant. Trump imposed a 10 % tariff on most Chinese imports and 25 % of customs tariffs on most imported steel and aluminum. It has threatened 25 % of the customs tariff on Mexican and Canadian imports, as well as a “mutual” tariff dedicated to a group of commercial partners who put higher barriers in front of American goods purchases more than we do in their partners.
Trump says he will do. “The request “low interest ratesAnd through some unsuccessful logic, it appears to be believed that this would complete his tariff. If Trump has full control of the federal reserve, he can force him to reduce short -term rates. The possible result will be worse, like History has shown. Lucky to investors, Trump does not control the Federal Reserve, and President Powell indicated that he will remain disappointed by political pressure.
There is nothing that Trump can do or can do it to control long -term rates, which may make it increasingly unacceptable. If inflation rises, as some expect, the prices are likely to rise. This is because the value of the erosion of the money forces investors to search for a higher return to commit their money.
The main forecasters believe that the 10 -year treasury will remain near its current level, about 4.5 %, for the next year or two years. This is the equivalent of mortgage rates about 7 %.
Capital Economics says that the 10 -year -old Treasury may reach 4.75 % if it ends with the Trump identification war until it is worse than the markets expect. Some strategies I think it can be 5 % higherWith the rise in most consumer and business prices accordingly.
There is nothing wrong with interest rates on those levels – but it may cause Trump’s anger.
During his first term (before Covid), the cabinet for 10 years Average of only 2.42 % Even then Trump I complained that the rates were very high. Prices are now almost twice those levels. Real estate mortgage rates are currently approaching about 7 %, near historical averages, but nearly three points higher than the first Trump period. The ability to withstand housing costs Much worse now Through Trump 1.0.
Trump promotes himself as an installer who can solve all the problems that other politicians cannot, through the ability of super deals and other unique talents. So political analysts have begun to get rid of what Trump might do when interest rates are disobedient.
TD Cowen’s JARET Seibeg suggests that Trump may press for a greater governmental role in determining interest rates, from credit card balance rates, which are often double numbers. “We are concerned that the door began to open when the federal government grants power is stronger,” said Seburg in an analysis on February 12.
One of the reasons that may be worrying is that Dent Bank’s profits can. This may not disturb ordinary people, except that banks are unable to determine high rates enough for the risk price that will pay less money-and they may stop lending to borrowers with completely high risk. The credit crisis will harm some consumers and may slow down the entire economy.
Prices are monitored: President Donald Trump speaks to journalists at the White House Oval Office, where he signed an executive order, Thursday, February 13, 2025, in Washington. (AP Photo/Ben Curtis) ·Associated Press
Peter Orasag, CEO of Investment Company Lazard, argues that other countries that seek revenge amid Trump’s commercial wars can use higher rates as a kind of economic weapons. If foreign debt owners such as Japan and China want to take revenge on the Trump tariff, they can sell some of their treasury property, which would push our prices up and force the entire American economy to deal with high borrowing costs.
It may seem a little imaginary, but also employ a lack of technology without government experience The right -wing size is federal bureaucracy This is more complications than the largest company. If the rates decrease and Trump appears to be satisfied, this may be a wrong warning.
But no one can make sure of what Yarmb, who was growing on his way, would do it when he fulfilled the resistance of an unpopular market.
Rick Newman is a big column writer Yahoo financing. Follow it Blouse and x: @Rickjnewman.
