Fed Balances Delicately as Trump Urges Rate Reductions While Inflation Concerns Persist

The Federal Open Market Committee (FOMC) of the Federal Reserve is expected to announce a 25-basis-point reduction in interest rates at its upcoming meeting on October 28–29, 2025, as recent data suggests the job market is slowing and inflation remains muted. This would be the second rate decrease this year, following a similar move in September, and would set the federal funds rate within a 3.75%–4% target range, according to a

This expected rate cut is likely to offer only modest relief to consumers, especially those in the housing market. The average 30-year fixed mortgage rate was 6.34% as of October 2, down from 7.04% in January, but analysts warn that persistently high Treasury yields and inflation expectations are keeping borrowing costs elevated. "Although mortgage rates don’t move in lockstep with the Fed’s policy rate, they do mirror investor outlooks on inflation and economic prospects," explained Ted Rossman, senior industry analyst at Bankrate.com. Economists such as Kara Ng from Zillow Home Loans anticipate that rates could gradually decline through 2026, but are likely to stay "restricted" within the 6%–7% range for now.

For credit card users, the impact will be minimal. The average credit card interest rate is currently 20.03%, a slight dip from 20.12% in September, but a quarter-point reduction will barely lower borrowing expenses. "A 0.25% decrease won’t make a significant difference for most cardholders," Rossman said, noting that variable rates on existing cards usually adjust within one or two billing cycles after a Fed change. Auto loan rates, which recently dropped to 7.12% for new cars in late October, could fall further if the Fed continues to ease policy. However, Jonathan Smoke of Cox Automotive expects little change until automakers introduce year-end promotions.

The Fed’s move also has political implications. President Donald Trump has openly urged the central bank to cut rates more sharply, while Fed leaders must balance the risk that inflation could pick up again due to increased tariffs and immigration policies. "The Fed faces a delicate balancing act," said economist Sung Won Sohn, warning that cutting rates too soon could shake confidence if inflation rebounds or the economy deteriorates further.

Looking forward, futures markets for Fed funds indicate another 1% drop in short-term rates by the end of 2026, with long-term rates expected to ease slightly. For mortgage-backed securities companies such as Armour Residential REIT (ARR), this could mean higher distributable earnings as repo borrowing costs decline, according to a