Fed Holds Steady Amid Trump Pressure, Rate Cut Prospects Dim
Despite escalating political pressure from President Donald Trump, the Federal Reserve is widely expected to hold interest rates steady at its policy meeting this week. Amid a somewhat softening labor market, inflation pressures, and an uncertain geopolitical landscape, futures market pricing implies almost no chance of a rate cut, according to the CME Group’s FedWatch gauge.
Impact on Borrowing Costs
The Fed’s benchmark sets what banks charge each other for overnight lending, influencing borrowing and savings rates for Americans. The impact of the Fed’s actions varies significantly across different types of loans.
Mortgages
Fixed mortgage rates don’t directly track the Fed but typically follow long-term Treasury rates. As of Friday, January 26, 2026, the average rate for a 30-year, fixed-rate mortgage was 6.19%, down from over 7% a year ago. This decrease was partially helped by Trump’s push to have Fannie Mae and Freddie Mac buy $200 billion in mortgage bonds. Still, rates briefly spiked again due to geopolitical tensions surrounding Greenland.
Credit Cards
Most credit cards have variable rates, directly linked to the Fed’s benchmark. Following three consecutive rate cuts in 2025, the average credit card interest rate in the U.S. Fell to 23.79% in January, marking the lowest level since March 2023, according to LendingTree. Despite this decrease, rates remain high for those carrying a balance.
Auto Loans
Interest rates on modern-car loans have edged lower, but car buyers are financing larger amounts, worsening affordability. The average amount financed for a new car reached an all-time high of $43,759 at the end of last year, according to Edmunds. The average monthly payment on a new vehicle is also at a record high.
Trump’s Criticism and Potential Changes
President Trump has been vocal in his criticism of Federal Reserve Chair Jerome Powell, even suggesting he has narrowed down potential replacements to one candidate who might be more inclined to cut rates aggressively. Trump has stated that inflation has been “defeated” and that maintaining high interest rates disadvantages the U.S. Economically.
Trump has also proposed a temporary 10% cap on credit card interest rates, a policy that some bank executives, like JPMorgan Chase CEO Jamie Dimon, have warned would be an “economic disaster.”
Looking Ahead
The Federal Reserve’s decision to hold rates steady reflects a cautious approach amid economic uncertainties. While lower rates may be desired by some, the Fed appears focused on maintaining stability and controlling inflation. The ongoing tension between the White House and the Federal Reserve will likely continue to shape the economic landscape in the coming months.