3 Ways a Trump-Powell Faceoff Could Affect Your Wallet This Summer

Tensions are heating up again between President Donald Trump and Federal Reserve Chair Jerome Powell. Trump wants lower interest rates and Powell has so far not caved into his demands, which has drawn sharp criticism from the president. As of July 2025, the interest rate range is 4.25% to 4.50%, which has been holding steady since Trump took office, and it doesn’t appear Powell has plans to reduce rates right now.

Contents

Credit Cards Mortgage Rates and Home Affordability Risk of Inflation Why Cutting Interest Rates Is Needed

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In a June 2025 Federal Reserve press release, the Fed acknowledged that inflation is “somewhat elevated,” but stated the economy is in a stable state, as unemployment “remains low,” and the labor market is “solid.”

However, the main reason the Fed hasn’t lowered the rates is because of Trump’s tariff policies.

While attending the European Central Bank Forum on Central Banking, Powell said, “In effect, we went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” per CNBC.

While Trump and Powell are at a standstill, here’s how it could impact your money.

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Credit Cards

Household budgets have been stretched over the last few years due to the pandemic and inflation, which has caused many to heavily rely on credit cards to survive, CivicScience reported.

As of the first quarter of this year, Americans owe a collective $1.18 trillion in credit card debt, according to the Federal Reserve Bank of New York, and higher interest rates make it more challenging to get debt under control.

“If Powell keeps rates high to fight inflation, credit card APRs stay painfully elevated,” said Danny Ray, founder of PinnacleQuote. “That means every balance you carry costs you more, and minimum payments stretch families even thinner.”

He added, “Over time, that eats away at savings and slows down spending power, especially for middle- and lower-income Americans.”

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Mortgage Rates and Home Affordability

Higher interest rates mean homebuyers and owners pay more or don’t buy because it’s unaffordable.

“For example, a family looking to buy a $350,000 home could pay hundreds more each month compared to a lower-rate environment,” Ray said. “In fact, it prices many first-time buyers out entirely, forcing them to rent longer, often at inflated rates.”

Risk of Inflation

Inflation is slowly cooling and has dropped a bit. In January the rate was 3%, and as of June the inflation rate was 2.7%, but the Fed is worried about rates rising again.

“We need to be cautious if rates drop too quickly, we risk reigniting inflation, which could drive prices up and actually push many buyers out of the market, even with lower monthly payments,” said Peter Diamond, a federally licensed tax, accounting, real estate, and structure and certified bankability Expert®.

Why Cutting Interest Rates Is Needed

According to Diamond, Trump has a valid point for pushing the Fed to slash rates, but doesn’t agree with the president’s numbers.

“Trump is calling for 2% lower, which I think is excessive, but even 0.5 to 1% lower will have a big impact on the economy,” he said.

Cutting rates would be beneficial in several ways, Diamond explained.

“Cheaper debt and mortgages are a win for the economy and everyday Americans — lower interest rates mean more affordable housing and business investment,” he added. “Yes, it could stoke inflation and push asset prices higher, but honestly our rates aren’t sky-high by historical standards. The rates peak from previous cycles like the 5.25% to 5.50% range we saw in mid-2024, and nothing compared to the 1980s.”

While Trump and Powell face off, the middle-class suffers, according to Ray.

“Above all, uncertainty like this rattles the economy and keeps average folks stuck waiting and worrying instead of building wealth,” he said.

Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.

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