Donald Trump And The Campaign For Lower Interest Rates

This Week's Economy, June 6, 2026.

President Trump’s relentless campaign for lower interest rates began shortly after he took office for the first time in 2017. After his second election in 2025, Trump told the World Economic Forum that when he’s inaugurated, “I’ll demand that interest rates drop immediately.” Undoubtedly, Jerome Powell’s refusal to accede to Trump’s demand for lower rates caused the friction between the two.

Trump railed against Powell repeatedly, calling him a “moron” and even threatening legal action against Powell for the cost overrun in rehabbing the Federal Reserve’s Headquarters Building. Although this latter action was unrelated to interest rate policy, most seasoned observers saw it as Trump’s way to lash out at Powell for failing to follow the President’s wishes.

Last Sunday, May 31, Powell received the John F. Kennedy Profile in Courage Award, specifically for his protection of the Federal Reserve’s independence. In announcing the award, the JFK Center noted that Powell had withstood: “years of personal attacks and threats from the highest levels of government.” 1. A thinly veiled reference to the President.

By now, you may be asking, “ Why all this hoopla over interest rates? Yes, it would be nice if they were lower; your bank may reduce your credit card bill or monthly mortgage payment. But does it really matter if your monthly credit payments decline?

The answer is a resounding YES! It really is critically important, especially to a select part of our economy, a part that increasingly feels that it is the center of America’s economic and financial universe. It just so happens to be the same part of the economy that Donald J. Trump grew up in and flourished in.

Most Americans see Trump as a businessman, and by and large, that’s how he campaigned for President, as a successful businessman who would run the country just like he ran his successful properties (a claim that has recently come under some criticism). But Trump is certainly not a traditional businessman: his companies don’t manufacture products, don’t provide a service (in the traditional sense), and aren’t a mine or a farm. Instead, most of Trump’s wealth comes from the purchase or development of properties and their subsequent appreciation.

Think of Trump Tower, or Trump’s first major development, the New York Grand Hyatt. In both cases, Trump took existing properties, the Bonwit Teller Department Store on Fifth Avenue (for Trump Tower) and the old Commodore Hotel on 42nd Street (for the Hyatt), arranged for financing, and then built the new landmark edifices.

Of course, a million steps that had to be undertaken: architect’s plans approved, zoning laws met, various trade unions agreements settled, the list goes on and on. All of which represents a major accomplishment for Trump and his organization. But the one irreplaceable step was financing. Without the money to complete the task, nothing would be built.

So where did the money come from? The lenders lent it. And that’s all you need to know to understand Donald Trump’s fixation on interest rates — the principal expense in all loans.

Side note: It was Fred Trump (Donald’s father) who was the principal financial source for both the Grand Hyatt and Trump Tower. Along with the Equitable Life Assurance Company, Fred Trump provided the indispensable financing for both projects.

So just what kind of “business” was Donald Trump operating in? The answer depends entirely upon when you asked it. Trump’s principal business lies somewhere between investing and speculating. But exactly what distinguishes those two has changed over time.

There are two major ways that regulators and banks can control speculation: interest rates and loan levels. Higher interest rates or lower loan levels reduce speculation. In contrast, lower rates and higher loan levels (Trump’s position) increase speculation.

Loan Levels

Over the past 50 years, we’ve seen the lending level for stock investments rise from 35% to 50%. Broker Loan Rates are set by Regulation “U.” However, it is possible to obtain a “securities-backed line of credit (SBLOC) from your bank that will lend you up to 95%. It is consistent with an overall trend toward greater financial leverage and, hence, more speculation.

At one time, home mortgages required a 20% down payment; today, the FHA requires only a 3.5% down payment, while VA and USDA require no down payment at all.

Interest Rates

While the historic trend has been to provide greater and greater loan levels, the most recent Fed Interest Rate Policy, the one Trump rails against, has been to raise interest rates. When Trump left the Presidency, the Fed Funds Rate stood at less than 1%; when he returned, it had risen to 4.3% — a dramatic rise, to say the least.

From Trump’s perspective, this was a disaster, but from the Fed’s perspective, the tighter interest rate policy was working. Inflation, which peaked in Q2 2022 at 2.4%, had declined by two-thirds. What’s more, the country’s financial behavior was beginning to change, and the push to borrow was declining. Across the board, the nation was slowing down on its borrowing binge. From the Federal Government to Corporations to households, the rate at which we went to the bank for more money declined.

It began to look like Trump’s long campaign for lower interest rates was now the answer. With lower inflation and a reduced appetite for speculation, in other words, a lower demand for leverage (borrowing), the Fed was free to accede to lower interest rates.

That’s just what happened during 2025. The Fed went on a steady diet of reduced rates.

But just when we thought we were out of the financial woods, two things happened that increased the cost of living. In other words, inflation raised its ugly head.

The first was a jump in import costs at the beginning of Q2 2025. The President called it the most beautiful word in the dictionary: tariffs. However, no matter how attractive, the advent of tariffs broke the declining trend in inflation. As economists were quick to point out, almost all the tariff costs were borne by consumers, increasing their cost of living.

The second major inflationary boost came with the Conflict with Iran. When Iran blocked the Strait of Hormuz, oil prices spiked, and gasoline rose to just under $4.50 per gallon.

For the Federal Reserve, this latest round of inflation would put to rest any effort to lower interest rates. After all, the Fed’s most effective tool in fighting inflation is to tighten rates.

So ends Page 1 in Trump’s effort to lower interest rates.

Page 2

Friday saw the Dow Jones Industrial Average fall by over 800 points, an especially stunning number given the news that ignited this decline was the very positive increase in the nation’s payrolls, the number of people working. The Bureau of Labor Statistics reported that 172,000 people found new jobs in May, and, what’s more, the BLS undercounted the March and April numbers; the economy added a total of 64,000 new workers in those two months. Altogether, these were spectacular results, and indicated that the labor markets are humming along nicely.

Before stiffling a yawn, you’ll want to know that some of the wealthiest managers on Wall Street just lined up at their favorite watering hole, Harry’s, for a second double martini. All these new jobs represented the worst possible news. You see, just like the President, these are part of that vast network of financial speculators, property developers, venture capitalists, and other financiers to whom capital, or more precisely borrowed capital, is their chief source of wealth.

The explanation is somewhat complicated, but here’s the brief version: The Federal Reserve Board, which sets short-term interest rates, is governed by two principal rules, called mandates. The Fed must seek to achieve an economy with full employment (narrowly defined, generally at a 4% unemployment level) and stable prices (narrowly defined currently at 2% inflation).

As noted above, inflation is currently a problem. The Consumer Price Index is running at 3.78% increase, almost double the target. It would call for the Fed to raise, not lower, interest rates.

So that left just one data point that could justify a rate cut: full employment. If the economy were not creating new jobs, then the Fed might still find a way to lower interest rates.

Friday blew that thinking out of the water. It’s hard to imagine a worse Payroll Report for those who wanted lower rates. Not only was the May Report with a gain of 172K new jobs, indicating that jobs are coming along fine, but both March and April were better than the initial reports. In other words, the economy is creating new jobs just like it should; no help from the Fed is needed.

Instantly, any hope that Wall Street or the President might have of lower interest rates just evaporated. It’s more likely that the Fed will need to raise rates rather than lower them. And that means that the principal expense for those who use financial leverage is likely to increase.

Even a dovish new Fed Chair, Kevin Warsh, will likely see higher rates in his future.

SOURCES

https://www.jfklibrary.org/about-us/news-and-press/press-releases/2026-profile-in-courage-award-announcement-release

https://www.usdebtclock.org/

https://taxfoundation.org/blog/who-pays-tariffs/