U.S. Federal Reserve Chairman Kevin Warsh walks through the halls of the Kansas City Federal Reserve’s Jackson Hole Economic Policy Symposium in Moran, Wyoming on August 28, 2026.
David Paul Morris | Bloomberg | Getty Images
Ahead of the Federal Reserve’s September monetary policy meeting next week, President Donald Trump and administration officials are urging the central bank not to raise interest rates or even lower the benchmark.
For consumers, rising interest rates will increase borrowing costs at a time when affordability pressures are already mounting.
However, tightening monetary policy could also curb spending and borrowing, cooling the economy and easing inflationary pressures. Experts say this could ease the pinch on everyday expenses like groceries and gas that plague most American households.
Inflation remains well above the Fed’s 2% target, and the central bank has kept interest rates on hold for most of the year. But investors are hoping for a rate hike at its Sept. 15-16 meeting, even as Fed Chairman Kevin Warsh is scaling back so-called forward guidance, the way the Fed signals future interest rate movements.
Federal funds futures last priced in a 60% chance that the central bank would raise interest rates by a quarter of a percentage point, according to CME Group’s FedWatch tool.
The September session comes just weeks before midterm elections in November, as polls show voters remain broadly dissatisfied with rising prices and borrowing costs.
In addition to inflationary pressures from the ongoing war with Iran and volatility in the bond market, a potential Fed rate hike could further strain household budgets.
“Sustained high prices are hitting middle- and low-income households particularly hard, many of whom are struggling to afford basic necessities,” said Mark Hamrick, economic analyst and founder of the Hamrick Brief.
Cases where interest rates increase
President Trump argued that the United States should have the lowest interest rates and that keeping the federal funds rate too high would put the United States at an economic disadvantage relative to low-interest-rate countries.
The president has not targeted Mr. Warsh specifically, as he did with former Chairman Jerome Powell, but in a Sept. 4 post on Truth Social, he wrote, “With great new leadership in place, the Fed Board has to be smart – be patriotic for change.”
But Mark Higgins, senior vice president at Index Fund Advisors and author of Investing in U.S. Financial History: Predicting the Future, said cutting rates too soon could undermine efforts to curb inflation.
“History has shown that the most reliable way to restore price stability is to maintain sufficiently restrictive monetary policy until inflation is decisively contained,” Higgins said. “Given this period of inflation, I believe it is appropriate and in the best interest of the American people to send a clear message through raising interest rates.”
How the Fed’s next action will affect you
When the Fed raises interest rates, borrowing costs rise. Consumers are facing rising costs for financial products such as auto loans, credit card debt, and mortgages.
Short-term interest rates on consumer debt are generally pegged strictly to the prime rate, which is typically 3 percentage points higher than the federal funds rate. Long-term interest rates are largely determined by inflation expectations and other economic factors.
For example, 15-year and 30-year fixed mortgages typically track Treasury rates, rising rapidly as bond yields rise.
The yield on the 10-year U.S. Treasury briefly rose above 4.8% on Tuesday, and the average interest rate on a 30-year fixed mortgage rose to 6.89% on Tuesday, as rising oil prices fueled inflation concerns, according to Mortgage News Daily.
“The president’s recommendation that the Fed cut interest rates would almost certainly backfire and cause long-term interest rates, which are already rising, to rise even more significantly,” said Mark Zandi, chief economist at Moody’s.
He said fixed interest rates on mortgages had risen from less than 6% before the war with Iran and could rise to levels well above 7%. “Borrowing costs for businesses and commercial property owners are likely to rise and even the stock market will come under pressure.”
Zandi said the Fed’s rate hike will spook bond investors who expected the Fed to raise rates to combat above-target inflation. “This shows that the Fed has lost its independence from the president, which will lead to higher inflation in the future.”
At the end of the day, Hamrick said, maintaining the credibility of the Federal Reserve is most important.
He said if consumers lose confidence in the Fed’s ability to restore price stability, they may begin to see higher inflation as inevitable. “These expectations could become self-reinforcing and influence wage and price decisions, making inflation more difficult to control.”
Hamrick said the administration’s push highlights why the Fed’s autonomy is important. “Maintaining agency independence ultimately strengthens our ability to serve the American people.”
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