No Relief for Interest Rates and Increased Expectations That Borrowing Rates Will Rise

A change in leadership at the Federal Reserve did not lead to the immediate change that President Donald Trump has demanded for months: lower borrowing rates. In fact, the opposite could be happening later this year if the Fed decides to raise rates following implementation of policies since Trump returned to office which included launching a global trade war and military strikes against Iran.

Those actions are among the forces that have pushed up inflation higher than when President Trump took office (4.2% versus 3%) and kept the country’s inflation rate from falling back to the 2% level that the Fed has traditionally preferred.

Federal Reserve Chair Kevin Warsh

New Fed Chair Kevin Warsh signaled that rate increases could be possible later this year following the persistent inflation that Trump has been unable to eliminate as he previously promised to voters when the campaign for the job in 2024.

At an October 2024 rally in Saginaw, Michigan, candidate Trump told voters, “Starting on Day One of my new administration, we will end inflation. And we will make America affordable again."  

Regardless of whether voters took his campaign promise literally, they likely have been disappointed that inflation has risen, largely driven by higher energy prices following Trump’s decision to launch military strikes on Iran.

Optimists hope prices can fall rapidly as President Trump has claimed that they will.

Marko Papic on Lower Borrow Rates

Geopolitical expert Marko Papic told American Farmland Owner last December that lower borrowing rates may be necessary to stimulate the economy. But he cautioned that the country’s rapidly soaring national cumulative debate that nears $40 trillion is burdening economic growth.

The debt has risen nearly $30 trillion since Trump took office in 2017, Joe Biden followed in 2021, and Trump returned to office in 2025.

Papic said lowering interest rates will require more sound budgeting from both parties in Congress, something that they have largely abdicated for years.

“That requires less fiscal profligacy,” Papic said. “It requires discipline. And unfortunately, Congress is so broken. And Democrats and Republicans just disagree fundamentally on how to raise revenue or cut spending. The only thing that we can do is the President of the United States of America makes this executive decision to raise tariffs.”

The U.S. Supreme Court already ruled that President Trump lacked the executive authority to unilaterally impose tariffs under the International Emergency Economic Powers Act (IEEPA), a 1977 national emergency law.

Higher Interest Rates for Farmers

As a traditionally capital-intensive industry, agriculture risks higher debt burdens, increased breakeven costs with margins that are already tight, potential downward pressure on farmland values, and rising costs for new machinery if the Fed raises rates.

CNBC laid out some of the changes that Warsh may institute at the Fed as members consider whether to raise the federal funds rate once (twice?) later this year.

RELATED: “That was a pretty bold step to begin a rate-cutting cycle,” this former regional Fed leader told American Farmland Owner in late 2024 following the Federal Open Market Committee’s decision to lower the federal funds rate by 50 basis points during its September meeting.