President Donald Trump has indicated that he anticipates nominating a new chair for the Federal Reserve within this month. When that occurs, Trump will have exhausted his justifications: This will formally be recognized as his economy, for better or worse. During the initial year of his second term, Trump has predominantly attributed the nation’s affordability challenges to two individuals: Former President Joe Biden and Fed Chair Jerome Powell, whom he claims are responsible for economic mismanagement and the unchecked rise in prices. However, those justifications are increasingly losing their credibility. Excuse No. 1: Biden. Trump persists in criticizing Biden regarding elevated inflation levels; however, it is important to note that Biden has not been in office for a full year. Recent polls indicate that the American public is increasingly reluctant to extend Trump the benefit of the doubt. In a recent poll regarding the economy, 61% of Americans indicated that they believe Trump’s policies have “worsened economic conditions in this country.” A greater proportion attributed the economic trajectory to factors other than Biden’s policies. Excuse No. 2) Powell. Trump began to voice his criticisms of his 2017 selection for the Federal Reserve chair almost immediately upon resuming office, rebuking Powell for maintaining interest rates at levels that do not align with Trump’s preferences. Powell has recognized that the Federal Reserve reacted tardily to the inflationary pressures that emerged in 2021 and 2022, which has led to him being dubbed “too late” by Trump in his social media critiques.
Trump contends that Powell is once again tardy, asserting that lowering interest rates would facilitate a decrease in mortgage rates and rejuvenate the stagnant housing market. Despite Powell being Trump’s own selection to head the Federal Reserve, Trump has characterized his nomination as a misstep, asserting that the forthcoming Fed chair will promptly reduce interest rates. Upon the appointment of that chair, anticipated in May with the expiration of Powell’s term, Trump will have asserted ownership of the economy. This could present a politically precarious proposition for the president. One of the significant risks associated with Trump’s economic blame game is that the president has likely set unrealistic expectations regarding the capabilities of the new Fed chair. While the Fed chair exerts significant influence over the voting members of the rate-setting Federal Open Market Committee, they remain merely one of 12 votes and lack the authority to unilaterally determine interest rates. Trump faces several Federal Reserve appointments this year, and the selection of aligned individuals could potentially facilitate a transition towards lower interest rates; however, such an outcome is not assured. Even if the next Fed chair reduces rates substantially in 2026, it remains uncertain whether this would significantly alleviate America’s affordability issues. It could potentially exacerbate the situation. Reduced interest rates can lead to a decrease in borrowing costs for businesses, thereby facilitating access to capital for hiring and various expenditures. Over time, this can contribute to an improvement in the job market; however, it may also lead to an increase in prices. An increase in employment opportunities may result in higher wages, subsequently driving greater consumer demand.
Adjustments in interest rates often require an extended period to permeate the economy, and the Federal Reserve has already enacted rate reductions in three consecutive meetings to conclude 2025. Further reductions in rates pose the risk of a prolonged resurgence of inflation. Lower interest rates could, however, facilitate a reduction in mortgage rates. The two are not directly correlated; rather, home loan rates are more closely associated with long-term US Treasury yields. However, these typically exhibit a correlated movement over time with the adjustments in the Fed’s short-term interest rates. Elevated interest rates have undoubtedly impacted the housing market, while a reduction in mortgage costs may potentially create opportunities for certain first-time buyers. A decline of merely one percentage point has the potential to reduce the monthly expenses associated with homeownership by hundreds of dollars, while also significantly decreasing long-term interest payments by hundreds of thousands of dollars. However, reduced mortgage rates would not address elevated housing prices, which are largely influenced by a significant supply deficit. According to a source, America must construct an additional 4 million homes to align with the demands of population growth. This has led to persistent affordability challenges in key urban centers, particularly in New York and San Francisco. Lower mortgage rates could potentially worsen the wealth divide in America, allowing existing homeowners to refinance their mortgages and access their home equity, while failing to significantly increase the supply in the market. Ultimately, the president has limited capacity to influence the trajectory of the US economy – a $30 trillion entity that federal legislation and executive orders exert minimal control over. Trump has implemented policies that influence the affordability for Americans, yielding both positive and negative outcomes.
For instance, tariffs have increased the average expenses of American households by $1,100 in 2025, as reported. Trump’s spending and tax bill is projected to result in larger tax returns for millions of Americans in 2026; however, it is also anticipated to displace millions from Medicaid coverage. He has successfully negotiated with numerous pharmaceutical companies to reduce prices for Medicare beneficiaries and proposed $2,000 tariff rebate checks to be distributed prior to this year’s midterm elections. While these policies may have considerable implications for the financial well-being of many Americans, they are unlikely to address the fundamental challenges confronting the economy. Hiring has reached a standstill, unemployment is increasing, wage growth is declining, inflation persists at elevated levels, and lower-income Americans are struggling to make ends meet. Trump’s economic message – asserting that the economy is booming and merits a “A+++++” grade – has resonated poorly with Americans, many of whom are grappling with financial challenges or perceive the American Dream as increasingly unattainable. Trump’s strategy of assigning blame, which has largely gone unheeded, is nearing a point where suitable scapegoats are becoming scarce. This indicates that Trump will politically possess this economy at a potentially inopportune moment, as both the job market and affordability seem to be in decline. The midterms are approaching, and American voters are once more making decisions influenced by their financial considerations.