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WASHINGTON — <\/span>President Donald Trump<\/a> has been losing his own battle to cut interest rates.<\/p>\n The president likes to vilify high rates as an affront to the size and strength of the U.S. economy, saying that America deserves the cheapest borrowing costs in the world. Trump for months publicly pressured the Federal Reserve<\/a> to slash its benchmark rates, claiming it would be \u201cRocket Fuel!\u201d for growth and make housing more affordable.<\/p>\n But since the war in Iran began at the end of February, borrowing money has become more expensive<\/a>, meaning fewer families can afford mortgages or auto loans. The government is getting squeezed, too \u2014 as it has spent $827 billion so far this fiscal year to service the national debt, more than it has devoted to national defense.<\/p>\n The scope of the problem became clear this past week when Kevin Warsh<\/a>, the Fed’s new chair picked by Trump, said in his second press conference on the job that inflation continues to run hot<\/a> but offered no clear guidance on how to fix the problem.<\/p>\n Rates on 30-year U.S. Treasury bonds hit their highest levels in nearly two decades, the exact opposite of what Trump had pledged to voters. The 10-year U.S. Treasury note saw its interest rate shoot up above 4.7% on Friday, surpassing what the president inherited when he returned to the White House last year.<\/p>\n But Trump has largely ignored the jump in interest rates and has portrayed the economy as booming, even though the government recently reported that the annual growth rate for the prior three months was a sluggish 1.5%.<\/a><\/p>\n \u201cWe have the most successful environment that we\u2019ve ever had,\u201d Trump told his Cabinet on Friday<\/a>. \u201cThere\u2019s never been anything like it from the standpoint of investment into our country.\u201d<\/p>\n Neither Trump nor his Treasury Secretary, Scott Bessent, discussed interest rates during the public portion of the meeting. But White House spokesman Kush Desai said the end of the Iran war would ultimately reduce energy costs and allow the Fed to reduce rates. \u201cOil prices \u2014 and thus overall inflation \u2014 will plummet again when President Trump forces a successful resolution with Iran, further paving the way for additional interest rate cuts by the Federal Reserve,\u201d Desai said.<\/p>\n The prospect of higher borrowing costs has become troublesome for Republicans in the November elections, as Trump\u2019s own policies helped drive the increase.<\/p>\n His tariffs that began last year caused rates to jump so quickly that he backed off and reformulated them<\/a>. Trump has championed the construction of data centers<\/a> for artificial intelligence, but the bonds financing those projects appear to have helped push up interest rates. And the war in Iran has fueled rising oil prices.<\/p>\n Republicans had hoped to show clear progress on affordability<\/a> to voters ahead of the midterms. Trump can point to a low unemployment rate and solid consumer spending as proof that the economy remains stable, yet there are few signs that these arguments have connected<\/a> with the public.<\/p>\n One possible reason why Trump’s economic messaging has struggled is that voters care more about whether their incomes are outpacing inflation, according to research released in June by Georgetown University’s Juan Felipe Ria\u00f1o and the University of California, Berkeley’s Francesco Trebbi.<\/p>\n Trump and Republicans not only promised lower interest rates in the 2024 elections, but they indicated that prices could fall outright if their policies were in place. But over the last 12 months, inflation has nearly kept pace with hourly wage gains \u2014 and that understates the extent of the problem because debt service costs are not included in the consumer price index.<\/p>\n \u201cIt cut against Democrats in 2024, and if prices and borrowing costs keep outrunning wages into the fall, the same logic points at Republicans now,\u201d Ria\u00f1o, the Georgetown University economist, told the AP.<\/p>\n Earlier this year, the Trump administration directed Freddie Mac and Fannie Mae, the two mortgage firms under government conservatorship, to buy at least $200 billion in home loans<\/a> to bring down mortgage rates.<\/p>\n Earlier this year, Republicans had hoped to campaign on falling rates and a bipartisan bill to increase home construction to help defend their House and Senate majorities. One GOP lawmaker, who spoke on condition of anonymity to discuss strategy, said the hope was that Trump would sign the bill as mortgage rates fell below 6%, which could improve housing affordability and public sentiment toward the overall economy.<\/p>\n However, Trump called the bill a \u201cbig yawn\u201d and allowed it to become law without his signature<\/a>. And the mortgage company Freddie Mac said Thursday that 30-year rates were averaging 6.66%<\/a>, essentially unchanged from a year ago.<\/p>\n Warsh, the Fed chair since May, has said he has been content to let the financial markets do more to set the rates, rather than the central bank. Even though the Fed has held its benchmark rate steady this year, the markets on their own have chosen to charge a premium for holding U.S. government debt.<\/p>\n \u201cMarkets reflect the higher inflation, policy uncertainty,\u201d said John Silvia, the CEO of Dynamic Economic Strategy. \u201cThey are the product of events.\u201d<\/p>\n Warsh on Wednesday portrayed that as a positive, even if the result goes against what Trump expected from his new Fed chair.<\/p>\n \u201cMarket participants are learning to play the ball, not the referee \u2014 and market prices will continue to respond in the direction and magnitude they see fit,\u201d Warsh said. \u201cThis is, in my view, a change for the better \u2014 and we are just getting started.\u201d<\/p>\n But time might not be on Trump’s side for fixing high interest rates. The next Fed meeting on rates will conclude on Sept. 16. Markets currently expect Fed officials to vote to raise rates in order to reduce inflationary pressures, according to CME FedWatch.<\/p>\n<\/div>\n