Trump’s Fake Rate Promise: The Fed Controls Your Money
The real power behind interest rates lies with the Federal Reserve—not the President.
President Trump promised to do many things if elected for a second Presidential term, including lowering interest and mortgage rates.
Last Thursday, Trump seemingly attempted to make good on that promise by openly stating he would “demand” the Federal Reserve to lower interest rates.
Unfortunately, he has no power to demand that.
Who Controls Interest Rates?
The President does not control interest rates; the Federal Reserve does. The Fed controls the federal funds rate and directly influences consumer interest rates.
What is the Federal Reserve?
The Federal Reserve is an independent federal agency that can raise or lower rates when it decides it’s best for the American economy. No government official—not even the President—can demand that the Fed make particular decisions on monetary policy.
So, regarding interest rates, the President is simply a bystander, not a decision-maker.
Why Does ANY of This Matter?
Interest rates are critical in personal finance decisions because they directly affect borrowing costs, savings growth, and investment returns. They influence decisions to:
Buy a home
Refinance a mortgage
Renovate or remodel a property
Purchase a car
Take on credit card debt and make many other decisions.
According to the Pew Research Center, 77% of people make personal finance decisions based on headline news stories.
However, this particular news story about President Trump’s demands is more smoke and mirrors than actual substance, and I think it’s vital that you know it.
Making A Big Financial Decision Soon?
If you’re planning to make a significant financial decision soon and are considering how interest rates will affect you, here’s what you can do:
Watch the Federal Open Market Committee (FOMC) meeting on Jan. 28 - 29. The FOMC is a division of the Federal Reserve that decides on interest rates and other monetary policies. This meeting will tell you precisely if rates are increasing or decreasing.
Follow the Federal Reserve Board on Instagram. If you miss the live broadcast, a clip of monetary policy decisions is usually posted on the board's social media platform.
Until next time,
Isaiah from Earn Out Loud