Trump's push for lower rates clashes with rising Treasury yields

President Donald Trump has persisted in urging the Federal Reserve to lower benchmark rates, describing such cuts as a boost for growth. However, Treasury yields have risen sharply, with the 10-year note climbing above 4.7% and 30-year bond yields reaching their highest levels in almost 20 years, contrary to the president’s earlier promises.

The increase comes as inflation remains elevated and the Fed’s new chair, Kevin Warsh, offered no clear plan to curb price pressures during his recent press conference. While the administration has highlighted low unemployment and strong consumer spending, the latest quarterly growth figure was a modest 1.5%.

“We have the most successful environment that we’ve ever had,” Trump told his Cabinet on Friday.

White House spokesman Kush Desai linked the prospect of lower rates to a hoped-for resolution of the conflict in Iran, suggesting that falling oil prices would ease inflation and allow the Fed to cut rates.

Higher borrowing costs are becoming a concern for Republican candidates ahead of the November elections. Analysts note that wages have barely kept pace with inflation, and rising debt-service expenses are not fully captured in the consumer price index.

“It cut against Democrats in 2024, and if prices and borrowing costs keep outrunning wages into the fall, the same logic points at Republicans now,” Georgetown economist Juan Felipe Riaño told the Associated Press.

Efforts to improve housing affordability, including a directive for Freddie Mac and Fannie Mae to purchase $200 billion in mortgages, have not lowered rates, which remain around 6.6% for 30-year loans. A bipartisan bill aimed at increasing home construction passed without Trump’s signature.

Market participants indicate that rates are likely to stay elevated until the Fed’s next policy meeting on September 16, with many investors expecting a further hike to address inflationary pressures.