As President Donald Trump pressures Federal Reserve Chair Jerome Powell to cut interest rates, his newly passed tax-and-spending bill may be making that goal harder to achieve.
What Happened: The Trump administration’s proposed tax bill, which supporters dubbed the “Big Beautiful Bill,” is expected to push borrowing costs higher. This undermines Trump’s own calls for cheaper money, journalist Matt Yglesias says.
In a conversation with the New York Times’ Ezra Klein, Yglesias explained that massive borrowing plans could fuel inflation. Ultimately, this makes it harder for the Fed to justify lower rates or achieve long-term reductions.
The “Big Beautiful Bill” will balloon the federal deficit and subsequently crowd out private lending, Yglesias adds. This will pressure the Fed to keep interest rates high, and ultimately raise the cost of living for average Americans.
“So if you’re talking about young people who want to buy a house, the sticker price of a house matters, but the price of a mortgage also matters,” Yglesias says.
Car loans, small business financing, rural hospitals and energy bills will likely be affected, he adds.
“So it’s going to raise costs across the board for middle-class people, take away health care from lower-income people, put a big strain on rural hospital systems,” Yglesias says.
See Also: Alexandria Ocasio-Cortez Bashes Trump’s ‘No Tax On Tips’ Bill Provision As ‘Scam’
Why It Matters: Trump, Vice President JD Vance and other Republicans are hammering Powell online for not cutting interest rates fast enough, despite the fiscal contradiction at the heart of their messaging.
Observers note that Trump is attacking Powell and relentlessly pressuring the Fed to cut interest rates in order to devalue the dollar, boost U.S. exports and curb imports.
Powell emphasized that any rate cut at the July 29-30 Federal Open Market Committee meeting would be data-dependent.
Meanwhile, House Democrats are arguing that Trump’s tax legislation will worsen the nation’s financial state and strip away Medicaid and other basic services.
“It explodes our national debt, it militarizes our entire economy, and it strips away health care and basic dignity of the American people for what? To give Elon Musk a tax break and billionaires the greedy taking of our nation? We can not stand for it, and we will not support it. You should be ashamed.” Representative Alexandria Ocasio-Cortez (D-N.Y.) said Wednesday, July 2.
What’s Next: The Senate passed Trump’s bill on July 1 in a 50-50 vote, with Vance as the tiebreaker. Now, it goes back to the House of Representatives, where Speaker Mike Johnson will work to meet a July 4 deadline.
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