You've probably seen the headlines or the late-night social media posts. The ones where President Donald Trump demands—in no uncertain terms—that borrowing costs need to crater. On January 9, 2026, he took it a step further by calling for a 10% cap on credit card interest rates. It sounds great if you’re carrying a balance, right? But the reality of whether or not a president can Trump lower interest rates is a messy tangle of 1913 era laws, backroom political brawls, and the cold, hard math of the bond market.
Honestly, the president doesn't have a "dial" on his desk in the Oval Office to turn rates down.
If he did, they'd probably be at zero already. The power to set the federal funds rate—the benchmark that dictates what you pay for a mortgage or a car loan—belongs to the Federal Reserve. Specifically, it's the Federal Open Market Committee (FOMC). Trump has been incredibly vocal about his frustration with Fed Chair Jerome Powell, even going so far as to label him an "enemy" in the past. But vocal frustration isn't the same as legal authority.
The Credit Card Cap: A Bold Demand Meets Reality
Let’s look at this 10% credit card cap proposal. It’s the talk of the town right now. Trump basically told the industry they have until January 20, 2026—Inauguration Day—to get on board.
Banks are panicking. Or, at least, their lobbyists are.
Jamie Dimon, the head of JPMorgan Chase, hasn't been shy about his concerns. He’s warned that chipping away at the Fed’s independence or forcing arbitrary caps could actually backfire. Think about it: if a bank can only charge 10% on a credit card, but they're lending to someone with a shaky credit score, they might just decide not to lend at all. You end up with "credit contraction." That's a fancy way of saying it gets way harder to get a card if you aren't already rich.
Under current law, like the Dodd-Frank Act, federal regulators are actually prohibited from setting "usury limits" (interest rate caps). To make a 10% cap legally binding, Trump would likely need a win in Congress. Even with a Republican majority, passing a national interest rate cap is a tall order because many fiscal conservatives hate the idea of price controls.
Can He Fire the Fed Chair?
This is the billion-dollar question. Trump has floated the idea of firing Powell or even Fed Governor Lisa Cook.
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It's not that easy.
The Federal Reserve Act says governors can only be removed "for cause." Historically, "for cause" means you did something illegal or you're literally incapable of doing the job. It does not mean "the President thinks the 3.5% rate is too high." Right now, there’s a massive legal battle, Trump v. Cook, heading toward the Supreme Court. The outcome of that case could redefine how much control a president has over these "independent" agencies.
If the courts give him the green light, he could try to install "the Kevins"—Kevin Warsh or Kevin Hassett. Both are on his shortlist to replace Powell when his term as Chair expires in May 2026.
- Kevin Warsh: A former Fed governor who is seen as more "hawkish" (meaning he might not cut as fast as Trump wants).
- Kevin Hassett: A loyal economic advisor who might be more willing to align with the White House's vision.
The "Bully Pulpit" and Market Psychology
Even if he can't sign a law to lower rates today, Trump uses the "bully pulpit" better than almost anyone in history. Sometimes, just the threat of action moves the needle.
Take the mortgage market. Trump recently ordered Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities. The goal? Force mortgage rates down by creating artificial demand. It sort of worked—briefly. 30-year fixed rates ticked down a bit after the announcement.
But here’s the kicker: the market is smarter than most politicians.
If investors think the president is forcing the Fed to keep rates too low, they start to worry about inflation. If they worry about inflation, they demand higher yields on long-term bonds. This creates a "tug-of-war" where the Fed might lower short-term rates, but your 30-year mortgage rate actually stays high because the bond market is scared.
What This Means for Your Wallet
So, can Trump lower interest rates? He can certainly try to break the system until it bends.
If you're waiting for a 3% mortgage or a 10% credit card before you make a move, you might be waiting a while. The 2026 economy is proving to be stubborn. Inflation hasn't fully retreated to that 2% "sweet spot" the Fed loves, and unemployment is low enough that the Fed doesn't feel a desperate need to rescue the economy with massive cuts.
Actionable Insights for the Near Future:
- Don't bet on the 10% cap yet. If you have high-interest debt, look into balance transfer cards or personal loans now. Don't wait for a January 20 miracle that might get tied up in court for years.
- Watch the "Two Kevins." When the nomination for the next Fed Chair happens in early 2026, watch how the bond market reacts. If Treasury yields spike, mortgage rates will follow—regardless of what the President says on social media.
- Refinance windows may be short. If the Fannie/Freddie intervention causes a temporary dip in mortgage rates, that might be your best chance to refi. These "artificial" dips rarely last because the market eventually corrects itself.
- Keep an eye on the Supreme Court. The Trump v. Cook decision will be the definitive ruling on whether the Fed stays independent or becomes an arm of the White House.
Ultimately, the battle over interest rates in 2026 isn't just about numbers—it's about who really runs the American economy. Whether it's the elected president or the unelected bankers, your bank account is caught right in the middle.