The White House is bypassing the Federal Reserve, using executive power to directly intervene in the interest rates that voters feel most acutely. These actions not only disrupt the financial pricing system but also signal a shift in the power to set interest rates from the market towards political judgment. The systemic risks arising from this "transfer of pricing power" are far more alarming than mere interest rate cuts.
After intervening in the mortgage market by directing Fannie Mae and Freddie Mac to purchase Mortgage-Backed Securities—an action dubbed "Trump QE" by the market—Trump has now set his sights on a more politically sensitive area: credit card interest rates.
From attempting to lower mortgage costs to proposing a mandatory cap on credit card rates at 10%, the Trump administration is using executive power to repeatedly intervene in interest rate formation mechanisms traditionally led by the market and the Federal Reserve.
This is no longer a series of scattered policy probes but a clear strategic line: when the Federal Reserve is unwilling or unable to swiftly cooperate with rate cuts, the White House is bypassing the central bank to directly manipulate the interest rates most perceptible to voters.
The essence of the interest rate conflict lies not in inflation, but in voters' monthly mortgage payments and credit card bills. From a political economy perspective, Trump's moves are easily understood.
In a high-interest-rate environment, the persistent political pressure stems not from the abstract "federal funds rate" but from two indicators that directly impact household balance sheets: mortgage rates and credit card Annual Percentage Rates (APR).
The 30-year mortgage rate determines "whether one can afford to buy a house."
Credit card APR directly dictates the financing cost for a household's short-term cash flow.
For the average voter, these two rates are far more tangible and painful than the Consumer Price Index (CPI) or core inflation.
After repeatedly and publicly pressuring the Fed for rate cuts yielded no results, the Trump administration has evidently reached a conclusion: if it cannot change the policy rate, then it will directly alter the final destination of interest rate transmission.
In the mortgage market, the Trump administration chose a relatively "technical" path. By directing Fannie Mae and Freddie Mac to purchase MBS, the White House's goal is not to directly lower the risk-free rate, but to counteract the demand gap for MBS created by the Fed's balance sheet reduction, thereby compressing the spread between mortgage rates and Treasury yields.
Mechanically, this approach has three key characteristics: It is achieved through market transactions, not direct price-setting. It acts on the interest rate spread, not the benchmark rate itself. It has historical precedent in Quantitative Easing (QE) operations.
Precisely because of this, although the policy clearly carries a "shadow of monetary policy," the market has reluctantly viewed it as an "unconventional administrative intervention" targeting housing affordability, rather than a direct assault on the financial pricing system.
What truly alarms the market is the proposal to cap credit card rates at 10%. Unlike mortgages, credit card rates are not simply a markup on the cost of funds; they are the result of highly risk-sensitive pricing: They are unsecured loans. They have high default rates. They possess strong counter-cyclical properties. Interest income itself serves as a buffer against bad debts.
In the current environment, the average credit card APR in the US generally falls within the 20%–25% range. Forcing it down to 10% is equivalent to severing the risk-pricing mechanism without providing any fiscal subsidies or government risk backstops.
This is why even Bill Ackman, who has publicly supported Trump, bluntly stated this policy is "wrong." From the market's perspective, the consequences are straightforward: If the interest rate is insufficient to cover losses and provide a return on capital, the only rational choice for banks is to withdraw.
The likely outcomes are card cancellations, tightened credit limits, and subprime borrowers being excluded from the formal financial system, potentially pushing them towards higher-cost informal lending channels—an outcome history has seen repeated.
The deeper controversy lies not in the effectiveness of any single specific policy, but in the institutional precedent it establishes. Within the traditional framework, US economic policy has a clear division of labor: The Federal Reserve determines the "price of money." The executive branch and Congress determine the "use and redistribution of money."
Now, however, the White House is using administrative means to directly介入 and attempt to redefine the "reasonable range" for certain interest rates. This is not a formal takeover of the Fed, but it functionally erodes the central bank's de facto authority over interest rates.
If this logic is accepted, the questions will no longer be confined to credit cards: Are auto loan rates also "too high"? Do student loans also need rate caps? Are small business financing rates "unacceptable"?
What financial markets fear most is precisely this kind of uncertainty.
From "Trump QE" to credit card price caps, this series of actions points to one reality: when monetary policy cannot swiftly serve political objectives, executive power is seeking alternative pathways.
In the short term, mortgage rates might indeed fall by a few basis points due to MBS purchases. But in the long run, what the market truly needs to assess is a more fundamental question: If interest rates are no longer primarily determined by risk and capital, but are increasingly defined by political judgment, how will the financial system be repriced?
This, perhaps, is the variable more worthy of vigilance than the question of "whether rates will be cut."
Market risk warning and disclaimer: Markets are risky; invest with caution. This article does not constitute personal investment advice and does not consider individual users' specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investment decisions based on this content are made at one's own risk.
