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Vance, Trump double down on presidential influence on Fed policy

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Republican presidential candidate former President Donald Trump speaks during a press conference at his Mar-a-Lago estate on August 08, 2024, in Palm Beach, Florida. 

Joe Raedle | Getty Images

When it comes raising and lowering interest rates, Republican presidential nominee Donald Trump says the president should “at least have a say.”

“They’ve gotten it wrong a lot,” Trump said of the Federal Reserve‘s decision-making during a news conference on Thursday at his Mar-a-Lago residence in Florida. 

“In my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman,’ Trump said.

Sen. JD Vance of Ohio, the Republican vice presidential nominee, echoed this opinion in a CNN interview that aired on Sunday, saying that interest rate policy “should fundamentally be a political decision.”

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Also over the weekend, Vice President Kamala Harris told reporters in Arizona that she “couldn’t… disagree more strongly” with Trump’s suggestion that the president should have a voice in the central bank’s monetary policy moves.

“The Fed is an independent entity, and as president, I would never interfere in the decisions that the Fed makes,” Harris said.

The president has no direct control over interest rates

As it stands, the president exerts no direct control over interest rates. The Federal Reserve sets interest rates, and it operates independently of the White House.

“While the Fed’s day-to-day operations are intentionally removed from partisan political input to protect the central bank’s integrity, the Fed and its conduct of monetary policy remain democratically accountable,” said Brett House, economics professor at Columbia Business School.

Through the Federal Reserve Act, the legislative and executive branches of the government set the mandate of the Fed to promote maximum employment, keep prices stable and ensure moderate long-term interest rates, House explained.

“If a president wants to change this mandate, they always have the option to marshal support in Congress for an amendment of the act or new legislation,” he added.

A rate cut is coming

Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels in more than 40 years. The Fed responded with a series of rate hikes to effectively pump the brakes on the economy in an effort to get inflation under control.

The federal funds rate, which sets overnight borrowing costs for banks but also influences consumer borrowing costs, is currently targeted in a range of 5.25% to 5.50%, the result of 11 rate increases between March 2022 and July 2023.

Now, recent economic data indicates that inflation is falling back toward the Fed’s 2% target, paving the way for the central bank to lower its benchmark rate for the first time in years. The personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of 2.5% year over year in June. 

Markets have fully priced in the likelihood of at least a quarter percentage point rate cut in September and a strong likelihood that the Fed will lower by a full percentage point by the end of the year.

Once the fed funds rate comes down, consumers may see their borrowing costs start to fall as well.

Trump has a contentious history with the Fed

Trump, who nominated Jerome Powell to head of the nation’s central bank in 2018, has been advocating for lower rates for years. The former president was a fierce critic of the Fed chief and his colleagues while he was in the Oval Office, skirting historical precedent by repeatedly and publicly berating the Fed’s decision-making

During that time, Trump complained that the central bank maintained a fed funds rate that was too high, making it harder for businesses and consumers to borrow and putting the U.S. at an economic disadvantage to countries with lower rates.

Ultimately, though, Trump’s comments had no impact on the Fed’s benchmark.

“Any chairman is going to remain loyal to the Fed’s mandate over any browbeating from the White House,” House said. 

Now, however, Trump has cautioned against the Fed lowering rates shortly before the presidential election in November.

Trump told Bloomberg Businessweek in an interview in July that cutting rates in September, just weeks ahead of the election is “something that [central bank officials] know they shouldn’t be doing.”

Earlier this year, the former president also told Fox Business that he would not reappoint Powell to lead the Fed.

“I think he’s political,” Trump said. “I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”

Fed Chair Powell: We are a non-political agency, don't want to be involved in politics in any way

When asked about these comments during a press conference after the FOMC meeting last month, Powell underscored the Fed’s singular focus on the economy.

“We don’t change anything in our approach to address other factors like the political calendar,” Powell said. “We never use our tools to support or oppose a political party, a politician or any political outcome.”

According to Greg McBride, chief financial analyst at Bankrate.com, “the Fed’s independence will remain paramount — regardless of who is president.”

A ‘consequential year’ for monetary policy

The central bank is an independent agency that governs decisions about monetary policy without interference from the president or any branch of government. Therefore, it is theoretically free from political pressure.

Still, the stakes are high in 2024.

In January, Fed Chair Powell said at a press conference that this was going to be “a highly consequential year for, for the Fed and for monetary policy.”

In the months that followed, signs of economic growth and cooling inflation laid the groundwork for a widely anticipated rate cut, which is welcome news for Americans struggling to keep up with sky-high interest charges.

After July’s Federal Open Market Committee meeting, Powell said that central bankers would cut rates as soon as September, if the economic data supports it.

How the Fed adjusts policy during election years

In previous presidential election years, the Fed has maintained its charted course through the election, whether that was tightening as in 2004, cutting in 2008 or remaining on hold as in 1996, 2012 and 2020, according to a research report by Wells Fargo released in February.

Further, since 1994, the Fed adjusted its policy rate roughly the same number of times in presidential election years as in non-election years, the report said.

A separate research note by Barclays also found “no compelling statistical evidence that Federal Reserve policy is conducted differently during presidential elections.”

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Trump administration loses appeal of DOGE Social Security restraining order

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A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025. 

Nathan Layne | Reuters

The Trump administration’s appeal of a temporary restraining order blocking the so-called Department of Government Efficiency from accessing sensitive personal Social Security Administration data has been dismissed.

The U.S. Court of Appeals for the 4th Circuit on Tuesday dismissed the government’s appeal for lack of jurisdiction. The case will proceed in the district court. A motion for a preliminary injunction will be filed later this week, according to national legal organization Democracy Forward.

The temporary restraining order was issued on March 20 by federal Judge Ellen Lipton Hollander and blocks DOGE and related agents and employees from accessing agency systems that contain personally identifiable information.

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That includes information such as Social Security numbers, medical provider information and treatment records, employer and employee payment records, employee earnings, addresses, bank records, and tax information.

DOGE team members were also ordered to delete all nonanonymized personally identifiable information in their possession.

The plaintiffs include unions and retiree advocacy groups, namely the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans and the American Federation of Teachers. 

“We are pleased the 4th Circuit agreed to let this important case continue in district court,” Richard Fiesta, executive director of the Alliance for Retired Americans, said in a written statement. “Every American retiree must be able to trust that the Social Security Administration will protect their most sensitive and personal data from unwarranted disclosure.”

The Trump administration’s appeal ignored standard legal procedure, according to Democracy Forward. The administration’s efforts to halt the enforcement of the temporary restraining order have also been denied.

“The president will continue to seek all legal remedies available to ensure the will of the American people is executed,” Liz Huston, a White House spokesperson, said via email.

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The Social Security Administration did not respond to a request from CNBC for comment.

Immediately after the March 20 temporary restraining order was put in place, Social Security Administration Acting Commissioner Lee Dudek said in press interviews that he may have to shut down the agency since it “applies to almost all SSA employees.”

Dudek was admonished by Hollander, who called that assertion “inaccurate” and said the court order “expressly applies only to SSA employees working on the DOGE agenda.”

Dudek then said that the “clarifying guidance” issued by the court meant he would not shut down the agency. “SSA employees and their work will continue under the [temporary restraining order],” Dudek said in a March 21 statement.

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Most credit card users carry debt, pay over 20% interest: Fed report

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Julpo | E+ | Getty Images

Many Americans are paying a hefty price for their credit card debt.

As a primary source of unsecured borrowing, 60% of credit cardholders carry debt from month to month, according to a new report by the Federal Reserve Bank of New York.

At the same time, credit card interest rates are “very high,” averaging 23% annually in 2023, the New York Fed found, also making credit cards one of the most expensive ways to borrow money.

“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” said Erica Sandberg, consumer finance expert at CardRates.com. “The more a debt costs, the more stress this puts on an already tight budget.”

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Most credit cards have a variable rate, which means there’s a direct connection to the Federal Reserve’s benchmark. And yet, credit card lenders set annual percentage rates well above the central bank’s key borrowing rate, currently targeted in a range between 4.25% to 4.5%, where it has been since December.

Following the Federal Reserve’s rate hike in 2022 and 2023, the average credit card rate rose from 16.34% to more than 20% today — a significant increase fueled by the Fed’s actions to combat inflation.

“Card issuers have determined what the market will bear and are comfortable within this range of interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

APRs will come down as the central bank reduces rates, but they will still only ease off extremely high levels. With just a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Schulz.

Credit card debt?

Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, Schulz said. 

In fact, credit cards are the No. 1 source of unsecured borrowing and Americans’ credit card tab continues to creep higher. In the last year, credit card debt rose to a record $1.21 trillion.

Because credit card lending is unsecured, it is also banks’ riskiest type of lending.

“Lenders adjust interest rates for two primary reasons: cost and risk,” CardRates’ Sandberg said.

The Federal Reserve Bank of New York’s research shows that credit card charge-offs averaged 3.96% of total balances between 2010 and 2023. That compares to only 0.46% and 0.43% for business loans and residential mortgages, respectively.

As a result, roughly 53% of banks’ annual default losses were due to credit card lending, according to the NY Fed research.

“When you offer a product to everyone you are assuming an awful lot of risk,” Schulz said.

Further, “when times get tough they get tough for most everybody,” he added. “That makes it much more challenging for card issuers.”

The best way to pay off debt

The best move for those struggling to pay down revolving credit card debt is to consolidate with a 0% balance transfer card, experts suggest.

“There is enormous competition in the credit card market,” Sandberg said. Because lenders are constantly trying to capture new cardholders, those 0% balance transfer credit card offers are still widely available.

Cards offering 12, 15 or even 24 months with no interest on transferred balances “are basically the best tool in your toolbelt when it comes to knocking down credit card debt,” Schulz said. “Not accruing interest for two years on a balance is pretty hard to argue with.”

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The 60/40 portfolio may no longer represent ‘true diversification’: Fink

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Andrew Ross Sorkin speaks with BlackRock CEO Larry Fink during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center in New York City on Nov. 30, 2022.

Michael M. Santiago | Getty Images

It may be time to rethink the traditional 60/40 investment portfolio, according to BlackRock CEO Larry Fink.

In a new letter to investors, Fink writes the traditional allocation comprised of 60% stocks and 40% bonds that dates back to the 1950s “may no longer fully represent true diversification.”

“The future standard portfolio may look more like 50/30/20 — stocks, bonds and private assets like real estate, infrastructure and private credit.” Fink writes.

Most professional investors love to talk their book, and Fink is no exception. BlackRock has pursued several recent acquisitions — Global Infrastructure Partners, Preqin and HPS Investment Partners — with the goal of helping to increase investors’ access to private markets.

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The effort to make it easier to incorporate both public and private investments in a portfolio is analogous to index versus active investments in 2009, Fink said.

Those investment strategies that were then considered separately can now be blended easily at a low cost.

Fink hopes the same will eventually be said for public and private markets.

Yet shopping for private investments now can feel “a bit like buying a house in an unfamiliar neighborhood before Zillow existed, where finding accurate prices was difficult or impossible,” Fink writes.

60/40 portfolio still a ‘great starting point’

After both stocks and bonds saw declines in 2022, some analysts declared the 60/40 portfolio strategy dead. In 2024, however, such a balanced portfolio would have provided a return of about 14%.

“If you want to keep things very simple, the 60/40 portfolio or a target date fund is a great starting point,” said Amy Arnott, portfolio strategist at Morningstar.

If you’re willing to add more complexity, you could consider smaller positions in other asset classes like commodities, private equity or private debt, she said.

However, a 20% allocation in private assets is on the aggressive side, Arnott said.

The total value of private assets globally is about $14.3 trillion, while the public markets are worth about $247 trillion, she said.

For investors who want to keep their asset allocations in line with the market value of various asset classes, that would imply a weighting of about 6% instead of 20%, Arnott said.

Yet a 50/30/20 portfolio is a lot closer to how institutional investors have been allocating their portfolios for years, said Michael Rosen, chief investment officer at Angeles Investments.

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The 60/40 portfolio, which Rosen previously said reached its “expiration date,” hasn’t been used by his firm’s endowment and foundation clients for decades.

There’s a key reason why. Institutional investors need to guarantee a specific return, also while paying for expenses and beating inflation, Rosen said.

While a 50/30/20 allocation may help deliver “truly outsized returns” to the mass retail market, there’s also a “lot of baggage” that comes with that strategy, Rosen said.

There’s a lack of liquidity, which means those holdings aren’t as easily converted to cash, Rosen said.

What’s more, there’s generally a lack of transparency and significantly higher fees, he said.

Prospective investors should be prepared to commit for 10 years to private investments, Arnott said.

And they also need to be aware that measurement issues with asset classes like private equity means past performance data may not be as reliable, she said.

For the average person, the most likely path toward tapping into private equity will be part of a 401(k) plan, Arnott said. So far, not a lot of companies have added private equity to their 401(k) offerings, but that could change, she said.

“We will probably see more plan sponsors adding private equity options to their lineups going forward,” Arnott said.

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