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President Donald Trump wants lower interest rates. Achieving that objective will require overcoming bigger obstacles than Fed Chair Jerome Powell.
There are structural forces that drive the cost of borrowing, and right now they’re pointing up. Governments and businesses are piling on debt to pay for tax cuts, military spending, and AI investments — which means more demand for credit. As the Baby Boomers retire and China decouples from the US, the pool of saving to finance those loans is drying up.
Attacks on Fed independence risk shrinking the pool further. Investors don’t want to see the value of their hard-earned cash inflated away by a central bank under political control.
Add all of this together and it points to a world where 4.5% may be the new normal for ten-year Treasuries — the crucial rate for mortgages and corporate bonds, and the one Trump’s team says it wants to bring down. In fact, Bloomberg Economics analysis shows it’s more likely to trend above that figure than below it. For the world’s biggest economy, that means a wrenching transition.
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