Trump Can’t ‘Demand’ Lower Interest Rates From Fed

President Donald Trump is putting pressure on policymakers to lower interest rates just days before the Federal Reserve’s first rate-setting meeting of 2025.

“With oil prices going down, I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world,” Trump said Thursday in a virtual address at the World Economic Forum in Davos, Switzerland.

However, the Fed already lowered its benchmark rate by a full percentage point in 2024, and it’s not expected to cut rates in its upcoming meeting, which takes place Jan. 28 and 29. Several prominent Fed officials, including Fed Chair Jerome Powell, have cautioned against lowering interest rates too quickly in 2025 while inflation remains above the central bank’s 2% target.

The president doesn’t have authority over the Fed’s monetary policy, which is one reason Trump is unlikely to deliver on his campaign promise of bringing back record-low mortgage rates.

[READ: Compare Current Mortgage Rates]

No, Trump Can’t Lower Interest Rates

Donald Trump can “demand” lower rates in the same way that a 5,700-member Facebook group can “demand” that Taco Bell bring back the Enchirito. It doesn’t mean the Fed (or Taco Bell) will act accordingly.

While it is possible for Trump to wage a public pressure campaign against the Federal Reserve, the president can’t compel policymakers to move the benchmark interest rate. The Fed is a nonpartisan federal agency, so Trump’s remarks are “obviously a problem for the notion of central bank independence,” says Francesco Bianchi, economics professor at Johns Hopkins University, in a statement.

This isn’t the first time a U.S. president has tried to coerce the Federal Reserve to lower interest rates for political gain. Back in the 1970s, when inflation was even more rampant than it is in the 2020s, former President Nixon pressured Fed Chair Arthur Burns to cut rates. This scandal was largely overshadowed by Watergate during Nixon’s presidency — but in today’s political climate, it’s a relevant history lesson.

Unlike Burns, Fed Chair Powell has a proven track record of resisting political pressure. For starters, Powell was initially appointed to his position by Trump in 2017 and subsequently served under former President Joe Biden. During his tenure, Powell has made it clear (again and again) that he isn’t beholden to political interests. His primary commitment is to the Fed’s dual mandate of stable prices and maximum employment. Powell also said he will not resign before his term as Fed chair expires in May 2026 — even if asked by Trump.

Lowering the Fed Rate Won’t Necessarily Lower Mortgage Rates

On the campaign trail, Trump previously said he would bring back 2% mortgage rates by beating inflation. However, it’s not that simple. Mortgage rates are influenced by a host of factors, and they don’t necessarily track the federal funds rate.

“The interesting aspect is that it is not clear that making this kind of request will actually lower longer-term and mortgage rates, that largely depend on expectations and risk,” Bianchi says.

Mortgage rates are expected to stay elevated into 2025, so consumers shouldn’t hold out hope for record-low mortgage rates just a few days into Trump’s second term.

[Read: Best Mortgage Lenders]

More from U.S. News

Trump Promised Lower Mortgage Rates. Can He Deliver?

The Fed Cut Rates. Why Are Mortgage Rates Higher?

2025 Housing Forecast: Will Mortgage Rates Go Down?

Trump Can’t ‘Demand’ Lower Interest Rates From Fed originally appeared on usnews.com

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