President Trump may want a lower base rate on behalf of consumers, but it sure is convenient for national debt too

It is true that the housing market has stopped. At some point, the low basis price can improve the mortgage offers provided to potential buyers and Kickstart activity in the sector.

“Can someone inform Jerome too late?” Powell is that he harms the housing industry, very badly? “The President wrote about social truth this week.” People cannot obtain a mortgage because of it. There is no enlargement, and every sign indicates a significant price reduction. “It is too late” a disaster! ”

The pressure is likely to increase with the continuation of weeks, as the next basic meeting in the Federal Reserve in September – and possible hints at the Jackson Hall symposium this week.

Likewise, in July, he wrote: “Housing in our country is behind that Jerome is” very late “rejects the first rate of interest rates. Families are harmed because interest rates are very high, and even our country must pay a rate higher than it should be because of” very late “.

While Trump’s pressure on Powell was not common in Wall Street, placing the battle on behalf of consumers is more political acceptable. While Trump leads the consumers, economists focus on Trump’s point nation He also pays more because Powell refuses to give in to his demands.

This is what might be at the heart of the White House Crusade against the current basic price, as experts believe, because if the FOOC Open Market (FOMC) makes it cheaper for everyone, which will include the government.

The White House will be well aware of this fact, especially in the environment in which financially conservative Republicans will return to the uncle’s national debts of $ 37 trillion (and growing).

Of course, Trump’s two -fold motivation can be: he can want to enhance economic activity and drop his public expenditures as well.

Professor Joao Gomez, from Warton Business College at the University of Pennsylvania, told Professor Joao Gomez, luck In an exclusive interview. “I don’t know how these two weighs … but the latter is incredibly important. I think they are aware of this. The budget image will look much better if interest rates are 2.5 %, 2 %, 1 % – it will look completely different.”

In 2024, the average interest rate on US borrowing was 3.32 %. As of last month, it cost $ 1.013 trillion to maintain borrowing, approximately 17 % of federal spending for the fiscal year.

According to the treasury data you saw luckThe interest expenses due to the treasury notes in July alone were $ 38.1 billion. Added to that 13.9 billion dollars in cabinet bonds, 2.85 billion dollars on the floating price assets in the Treasury (FRN) and a total of $ 6.1 billion through the assets of securities that are protected by inflation in TIPS. The bill is concerned: a total of $ 60.95 billion for this month.

Professor Gomez said that reducing these prices “incredibly important”: “It may be more important than the impact that may cause it to grow.”

Mortgage question

A professor of Columbia Yameng University said that the low basis rate would start the housing market not given. luckBut it can reduce some tension for home owners “closed”.

Mortgage rates are partially dependent on the basic price of the country, but for a period of time much longer than the amendments to the Federal Reserve from month to month. This means that the reduction of 0.25 -bit per second is unlikely to make a big difference, as the professor said. However, lenders may discuss a possible reduction as a sign of system change in monetary policy, indicating that future rates may continue to reduce, which beneficially affects the rates that lenders can provide.

Professor explained that the mortgage offers take into account much more than the Federal Reserve Bank, “The banks will receive a installment, and that these installments depend a lot on: How do they think that the economy is going, what is the possibility of backwardness, and how bad bad [the applicant’s] Funding status? Everything will depend on a group of other things within the real economy. The relationship between borrowing costs and the short -term interest rate in theory there, but in practice this depends on many things. ”

“I think in particular that the environment we face now is one of the high uncertainty, and even if you get a price reduction … there is still a long way until the market believes that we will get – in the long run – the benefit of accessories or politics rates, and there will be no long way to think that the economy is stable enough so that the benefit is not at the forefront in the foreground.

In fact, when the Federal Reserve rates were reduced last September by 50 bits per second, the average mortgage rate increased for 30 years, according to the Federal Reserve in St. Louis. Jeff Ostrovsky, Banst Bank analyst, said, said, luck. “There is no clear connection between the standard of the standard for the federal reserve and the mortgage rates.”

However, the low foundation rate may indicate consumers that an environment is lower on the road. Austerovsky added, this could reduce some effect that homeowners do not want to transport homes because fixed real estate loans in the long term are appointed at a rate that is presented in a previous period of low interest. The vision of low prices can enhance activity and encourage people to start looking at the market.

Will consumers benefit or not?

In addition to launching some tension in the housing market, there are some clear aspects of some population composition when it comes to low rates, and the professor added some. There will be some “immediate relief” for people who live a “salary check to salary” and rely on credit cards if prices decrease lightly (especially if they continue to do so).

According to a study on the St. Louis Fed team, approximately 27 % of people in the tenth lower percentage have a credit card and 40 % of those in a second to the bottom. In the third percentage, about 50 % of people had credit cards they needed to pay, representing a large part of the population.

But consumers are not necessarily savings or spending: many will benefit from a lower rate on the side of the credit card, but they suffer from savings. The Federal Reserve this year reported that 59 % of people have savings accounts and have benefited from revenues at a higher rate.

“The financial institutions are actually very fast to pass price cuts to savings,” the professor noticed, with Echo Ostrovsky: “I got a high -yielding criticism account, and it seems that the FBI’s movements are what I get,” so it seems that the variable rates will move very quickly. ”

The net effect on consumers is “washing” added Ostrovsky: “I feel that Americans have turned a lot to store the wealth they own in the stock market … We don’t seem to hear the same screaming from retirees when prices drop.”

He added: “It is difficult to say that there is a real winner or loser because most Americans are consumers and investors, they are spent and condemned.”

Why does the government benefit?

If the cost of borrowing is cheaper for everyone who does not only mean companies and consumers, then this means that the government too.

Usually, when interest rates are lower, this applies to treasury revenues (government debt and the benefits that are paid to lenders to serve debt).

This was not always the case, during the past year, for example, revenue increased when the basis price decreased. This was due to a group of factors, JP Morgan wrote, including growth, economic uncertainty and questions about whether the September 2024 reduction would explain a change in the wave of monetary policy (spoiler alert: it was not).

But in general, low interest rates benefit the government’s final result because it can issue new debts with a lower allowance to maintain the loan.

Although it is difficult to appoint a “weight” whether Trump’s motives for voters or his management, the professor said what “can both be true.” The low basis rate is easy to “borrow for consumers, and it will reduce pressure on companies to borrow, which will motivate companies and some of that will be evident in the stock market. These are all important economic indicators for any country – this is definitely true.

“It is also correct that consumers and companies are not the only ones who borrow … the US government will borrow a lot at the present time, and certainly interest expenses on the US Treasury will be affected at the interest rate.”

The expert also pointed out that the proximity to the cheapest borrowing of the government may not be in all areas: “We have the treasury bills that ripen during the year, or three months, six months, horizons for 12 months. We also have very long debts.