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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.”

The Fed probably should have cut rates this week, strategist says

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Student loan borrowers in the dark as Trump targets Education Dept.

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An American flag and a U.S. Department of Education flag fly outside the US Department of Education building in Washington, D.C., U.S., Feb. 1, 2025. 

Annabelle Gordon | Reuters

Federal student loan borrowers experiencing difficulties with their loans could find they have no recourse as President Donald Trump‘s cuts to staff at the Department of Education are carried out, employees at the agency said.

Staffers at the Education Department tasked with fielding complaints from federal student loan holders and resolving their issues were let go in the recent job cuts, one employee told CNBC. At least eight of the fired staffers were working on a total of nearly 800 student loan borrower complaint cases, an employee said.

The remaining staff will likely have to take over these accounts. But, the employee said, “I have no idea when they’ll get reassigned.”

As a result, those borrowers “just have to continue to wait, and maybe they go into delinquency,” the staffer said.

Hundreds of thousands of people submit complaints to the Office of the Ombudsman at Federal Student Aid each year, according to a rough calculation by higher education expert Mark Kantrowitz.

Trump is expected to sign an executive order calling on Education Secretary Linda McMahon to abolish the agency, a move that experts say would worsen the situation for borrowers. The Wall Street Journal first reported on that expected order.

As a department authorized by Congress, the department cannot be eliminated without congressional approval. But in the meantime, the Trump administration can slowly starve it by cutting resources.

There are roughly 42 million Americans who owe federal student loans, and the outstanding debt exceeds $1.6 trillion. Currently, around 9.2 million people — 43% of the roughly 22 million borrowers with payments due — are behind on their payments, according to a recent VantageScore report.

Federal student loan borrowers need assistance now more than ever, the Education Department staffers said. Collection activity is resuming for the first time in roughly five years after the expiration of pandemic-era relief, and a new repayment plan, called SAVE, that millions had enrolled in is now blocked by the courts.

“People will start having their wages or benefits garnished,” the staffer said. “If this happens erroneously, it would be extremely difficult to resolve that on your own.”

“Borrowers would be stuck having their money seized without a way to stop it,” they said.

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Borrowers who reach out the Education Department with questions or complaints are now less likely to get assistance, the staffers told CNBC

Sources for this story requested anonymity because they feared retribution if they were named..

A White House spokesperson did not respond to questions from CNBC about the slowdown in student loan borrower assistance at the Education Department.

The in-house team dedicated to helping borrowers with Public Service Loan Forgiveness program no longer exists, a staffer said. As a result, remaining employees are unsure of where to direct borrowers who have issues with this program, the employee said. (PSLF is a popular way for public servants and those who work at nonprofits to get their debt canceled after 10 years of payments.)

“We lost that expertise and the ability to answer complaints in a timely manner,” the employee said.

Staffers say borrowers are already feeling the effect.

One employee told CNBC they are currently helping a woman get her student debt discharged because of her disability, and that “every time we talk she’s terrified I won’t be there the next time.”

The employees said their work in complaint resolution has had huge impacts on people’s financial lives, and those efforts are now at risk.

They said they were able to get loans discharged for victims of identity theft, teachers and countless disabled borrowers.

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Past-due student loan borrowers may see credit scores tank: VantageScore

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Students walk through the University of Texas at Austin on February 22, 2024 in Austin, Texas. 

Brandon Bell | Getty Images

For the first time since the pandemic, becoming past-due on your student loan payments will hurt your credit again.

The more than 9 million borrowers who are late on their payments may see their credit scores tank by as much as 129 points as the U.S. Department of Education ramps up collection activity again, a new report by VantageScore finds. The credit score company analyzed U.S. Department of Education data.

Meanwhile, those who are paying their student loan bills on time will likely benefit from a rise in their credit scores by much as eight points, according to VantageScore.

Credit scores typically range from 300 to 850, with around 670 and higher considered good.

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It’s been a long time since federal student loan borrowers have needed to worry about the downsides of missed payments, which can also include the garnishment of wages and retirement benefits. That’s because collection activity was suspended during the the pandemic and for a while after. The relief period officially expired on Sept. 30, 2024.

“For the first time in five years, federal student loan delinquencies will start to reappear on credit files,” said Rikard Bandebo, chief economist at VantageScore, in a statement.

Here’s what student loan borrowers should know about their credit scores.

43% of borrowers with bills due were behind

How to stay current on your student loans

Student loan borrowers struggling to make their payments have options, said higher education expert Mark Kantrowitz.

The borrowers can apply for an income-driven repayment plan, which will cap their monthly bill at a share of their discretionary income. Many borrowers end up with a zero monthly payment. As of now, the applications for IDR plans are unavailable while the Education Department makes sure its plans comply with a new court order. But you should be able to access one in the coming months.

Borrowers can also apply for a number of deferments or forbearances, which can pause your payments for a year or more.

Additionally if you’re already in default on your loans, you should consider rehabilitating or consolidating your debt, experts said.

Rehabilitating involves making “nine voluntary, reasonable and affordable monthly payments,” according to the Education Department. Those nine payments can be made over “a period of 10 consecutive months,” its web site notes.

Consolidation, meanwhile, may be available to those who “make three consecutive, voluntary, on-time, full monthly payments.” At that point, they can essentially repackage their debt into a new loan. (The online loan consolidation application is also temporary unavailable.)

If you don’t know who your loan servicer is, you can find out at Studentaid.gov.

Experts also recommend that you check your credit reports regularly for free at AnnualCreditReport.com to make sure all three credit rating companies — Experian, Equifax and TransUnion — are showing your correct student loan balance and payment status.

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Wealth creation is booming as U.S. multimillionaire population jumps

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Global multimillionaire population rises 4.4% in 2024, report finds

When it comes to the rise of multimillionaires, the United States is leading the charge, a new report found.

The number of high-net worth individuals — or those with assets worth more than $10 million — rose 4.4% worldwide in 2024, to 2,341,378, but jumped 5.2% in North America, according to the annual Wealth Report by global real estate consultancy Knight Frank.

The U.S. is now home to almost 40% of the world’s super rich, the report estimates nearly double the share that resides in China, the region with the next highest contingent of wealthy individuals.

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“While the global economy slowed through 2024, the resilience of the U.S. helped prop up investor confidence,” Liam Bailey, global head of research at Knight Frank, said in a statement. “The trends powering wealth creation, including growth in financial markets led by equity markets and the bitcoin run, continued through 2024.”

Over the year, positive market conditions helped boost investors’ bottom line. The S&P 500 stock index gained 23% in 2024. The tech-heavy Nasdaq grew about 29% and the Dow Jones Industrial Average rose more than 12%.

“And despite geopolitical tensions, resilient global trade further contributed to growth,” Bailey said.

The rich are getting richer

Roughly 204 new billionaires were minted in just 12 months, the Oxfam report found.

“Not only has the rate of billionaire wealth accumulation accelerated — by three times — but so too has their power,” Amitabh Behar, Oxfam International’s executive director, said in a statement after the report’s release.

The latest numbers also underscore a deepening divide between the world’s rich and poor. 

Despite the fact that America ranks first as the richest nation, 36.8 million Americans live in poverty, accounting for 11.1% of the total population, according to the latest report from the U.S. Census Bureau. 

Many middle-class Americans are also showing signs of strain amid the escalating trade war and increased inflationary fears.

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