Why consumers may benefit if rates stay higher
Kevin Warsh, chairman of the U.S. Federal Reserve, walks the grounds during the Kansas City Federal Reserve’s Jackson Hole Economic Policy Symposium in Moran, Wyoming, Aug. 28, 2026.
David Paul Morris | Bloomberg | Getty Images
Ahead of the Federal Reserve’s September monetary policy meeting next week, President Donald Trump and senior administration officials have urged the Fed not to raise interest rates and, alternatively, even to lower its benchmark.
For consumers, higher rates would increase borrowing costs at a time when affordability pressures are already mounting.
Yet tighter monetary policy can also curb spending and borrowing, helping to cool the economy and ease inflationary pressures. Experts say that may lessen the pinch of everyday expenses, such as groceries and gas, which have been pain points for most U.S. households.
The central bank has kept rates on hold all year with inflation remaining well above the Fed’s 2% target. But even as Fed Chairman Kevin Warsh curtails so-called forward guidance — or how the Fed signals its upcoming rate moves — investors are expecting an increase in rates at the Sept. 15-16 meeting.
Fed funds futures were last pricing in a 60% chance the central bank will hike rates by one-quarter of a percentage point, according to the CME Group’s FedWatch tool.
The September meeting also comes just weeks before the November midterm elections, as polls show voters remain broadly dissatisfied with high prices and elevated borrowing costs.
A potential Fed rate hike, along with inflationary pressures stemming from the ongoing war with Iran and bond market volatility, threatens to further strain household finances.
“Persistently high prices have weighed especially heavily on middle- and lower-income households, many of which are struggling to afford basic necessities,” said Mark Hamrick, an economic analyst and founder of The Hamrick Brief.
The case for higher interest rates
Trump has argued that the U.S. should have the lowest interest rates and that maintaining a federal funds rate that is too high puts the U.S. at an economic disadvantage to countries with lower rates.
While the president has not directed his attacks specifically at Warsh, as he did former Chair Jerome Powell, in a Sept. 4 post on Truth Social he wrote, “The Fed Board, with its great new leader, must get smart — BE PATRIOTS for a change.”
However, reducing rates too soon could undermine efforts to tamp down inflation, according to Mark Higgins, senior vice president at Index Fund Advisors and author of “Investing in U.S. Financial History: Understanding the Past to Forecast the Future.”
“History demonstrates that the most reliable way to restore price stability is to maintain sufficiently restrictive monetary policy until inflation is decisively tamed,” Higgins said. “Considering the duration of this inflationary episode, I believe sending a clear message via an interest rate hike is…