While President-elect Trump has sought to pressure the Fed to cut rates, Orion’s brokers and your clients should know that consumer rates on mortgages and other loans are determined by a range of factors largely outside of the president’s control. Some campaign promises are notoriously hard to deliver on, and determining the business cycle, including rates, is impossible. Put another way, as a candidate, Donald Trump promised to relieve consumers of high interest rates. As president, doing so will likely be a slow process largely outside of his desires.

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Trump repeatedly said during the campaign that he would bring down interest rates without elaborating on how. He and his advisors suggested the president should have a say in determining rates set by the Federal Reserve and publicly berated the central bank and its chairman, Jerome Powell, for not lowering rates sooner.

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Orion’s brokers should know that while Trump has put a lot of emphasis on the Federal Reserve as a way to reduce the interest paid by consumers or businesses, the rates on mortgages and other longer-term loans are outside of any one person’s or institution’s control. Instead, those rates are largely determined by the bond market, where investors are looking at a range of long-term risks, like the likelihood of high inflation returning, prospects for economic growth and the United States’ ability to pay back its debts in the decades to come.

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Brokers should also remind clients that macro trends are more important and can’t be ignored. It is fine to try to keep the economy stable with relatively low rates, but the Federal Reserve has less control than people think. If a drought occurs that impacts food supplies, if the flow of tankers is diverted, if one nation invades another, global markets will be impacted, including U.S. mortgage rates.

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Granted, the Federal Reserve plays a part in influencing interest rates by setting the amount that banks have to pay short term to borrow money from each other in order to carry out their daily business. That amount can trickle down to how much lenders then charge consumers for a loan, but it isn’t always the case. Mortgage rates rose after the Federal Reserve cut rates in September for the first time since the pandemic, and despite the Fed cutting rates again on November 7,mortgage rates are expected to continue to rise based on the trends in the bond market.

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Trump has no direct control over the interest rates set by the Federal Reserve, which is determined by a committee that includes seven members appointed to 14-yearterms along with five regional Reserve Bank presidents. Under the current law, the president can’t fire Powell or any member of the Fed’s Board of Governors without “cause,” so removing any of those members because of a disagreement over interest rates would be challenged in court. Powell said during remarks on Nov. 7 that if Trump asked him to resign, he wouldn’t do so, and that it wasn’t permitted under the law for Trump to fire him or any members of the Federal Reserve board. While Trump has acknowledged that he likely doesn’t have the power to set rates or fire Powell, he’s indicated he isn’t going to stop voicing his views on what the Fed should be doing.

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Outside of any actions Trump may take with the Federal Reserve, interest rates are expected to gradually ease if inflation remains under control, or the job market begins to weaken. But Trump’s own policies could drive rates higher if they signal a return to higher-than-normal inflation. Trump has proposed putting sweeping tariffs on all goods imported into the U.S., including a 60%duty on imports from China. If past tariffs are any indication, that would drive up the prices consumers pay for goods and could trigger another wave of inflation that would push rates higher. Significant tax cuts that put more money in people’s pockets could also contribute to higher inflation.

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If the U.S. Congress takes steps to reduce its deficit and rein in spending, which would make the bond market more favorable to lenders and borrowers. If that doesn’t happen, we can expect higher mortgage rates. Meanwhile, regardless of interest rates, Orion’s AEs continue to offer superior products with excellent service and competitive prices.

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