Trump, Powell, and the Battle Over Interest Rates: What It Means for Your Money
When you hear “Federal Reserve,” you might think of a government institution. But despite its name, the Federal Reserve Bank isn’t part of the federal government—it operates independently. And right now, it’s at the center of a financial and political power struggle that could directly impact your mortgage, your savings account, and your next job offer.
At its core, the Federal Reserve (or “the Fed”) adjusts interest rates to help manage the economy. When things are running hot—too much growth, too much spending—it raises rates to cool inflation, just like it did between 2022 and 2024. When the economy stalls, like during the pandemic, the Fed slashes rates and prints money to encourage people to spend, hire, and invest. This delicate balancing act can feel academic—until your mortgage rate jumps 3% or your 401(k) tanks.
Now, things are getting personal. Former President Donald Trump has long clashed with Fed Chair Jerome Powell. He’s called him “incompetent,” accused him of slowing economic growth, and hinted at replacing him if reelected in 2024—even though Powell’s term doesn’t end until 2026. Trump wants lower rates to stimulate growth, slash loan costs, and juice the markets. Powell? He’s playing defense against inflation and thinks cutting too soon could be a mistake.
This isn’t just a power struggle—it’s a high-stakes bet on where the economy is heading. Lower interest rates make it cheaper to borrow. That means more people can afford homes, business loans get cheaper, and credit card APRs might drop. That’s good for buyers, builders, and banks. But if you cut rates while the economy is still strong, you risk fanning the flames of inflation again—and leaving the Fed with fewer tools when the next recession hits.
There’s a real danger here. If rates are already low when a downturn arrives, the Fed has little room to maneuver. They’d have to print more money or experiment with negative interest rates—measures that come with serious risks. We’ve seen this play out in Japan and Sweden, where decades of ultra-low rates led to sluggish growth and distorted markets.
There’s also the inequality factor. Lower interest rates typically benefit those who already own assets—stocks, real estate, businesses—because those assets rise in value. If you don’t own much, you miss out. Meanwhile, inflation eats away at the value of cash, and everyday costs rise faster than wages. On the flip side, higher interest rates reward savers, reduce risky borrowing, and slow inflation—but they also raise the cost of living for those carrying debt.
That’s why understanding the Fed’s decisions is no longer optional. Financial education is essential in today’s economy. Knowing when and why rates move—and how it affects your mortgage, your investments, or your retirement—is the difference between reacting to headlines and building real wealth. Tools like Market Briefs, a free daily newsletter, help you keep up with what’s really going on in the economy, from interest rates to crypto trends.
History tells us a recession is always coming—maybe not this year, maybe not next, but eventually. There have been 16 in the last 100 years. If we don’t have room to cut rates next time, we’ll need other tools—and those tools can create side effects we’re still feeling from the last crisis.
So whether or not Trump replaces Powell, the fight over interest rates will shape the next chapter of the American economy. And understanding that battle might be the smartest investment you make.
Jaspreet Singh is not a licensed financial advisor. He is a licensed attorney, but he is not providing you with legal advice in this article. This article, the topics discussed, and ideas presented are Jaspreet’s opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence.
