There's a policy tug of war happening, and your savings account and mortgage are in the middle of it.
On one side, President Donald Trump is demanding that the Federal Reserve cut interest rates. On the other hand, Fed Chair Jerome Powell is taking a wait-and-see approach to how the economic situation will play out. Should either man get their way, rates for savings accounts and vehicles, as well as for mortgages, will be impacted.
It's reached the point where Trump drafted a letter to fire Powell and presented it to Republicans, per The New York Times.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Can Trump fire Jerome Powell?
As things stand, technically, no, he cannot. As Powell said, Federal Reserve governors are "not removable except for cause." However, things might change on this front.
The president already removed two Democratic members of the Federal Trade Commission in March. Both members received emails from Trump stating the reason for their departures was due to "their continued service on the FTC is inconsistent with my Administration’s priorities."
One of the fired commissioners, Rebecca Kelly Slaughter, told CNN, "The president illegally fired me from my position as a Federal Trade Commissioner, violating the plain language of a statute and clear Supreme Court precedent.”
There's Supreme Court precedent from a 1935 case: Humphreys Executor vs United States. This case revolved around President Franklin Roosevelt's firing of Federal Trade Commissioner William Humphreys due to, you guessed it, policy differences.
Humphrey died shortly after his removal, and his estate sued for damages, saying the Constitution doesn't allow a president illimitable power to remove people. The court ruled in the estate's favor. The Trump administration wants this ruling overturned, which would lay the groundwork for Powell's dismissal.
In the meantime, Powell will continue to serve out his term, which Trump appointed him to and which expires in May 2026.
If Trump removes Jerome Powell, how does it impact savings accounts?
It's no secret that Trump wants the Federal Reserve to cut rates. If he's able to fire Powell, it's reasonable to assume he'll appoint someone to fill the role who will be more policy compliant with the current administration.
That said, firing him alone won't mean that the new head can just institute rate cuts. The Federal Open Market Committee has 12 voting members. And while having a head that encourages rate cuts could help sway the opinion of others, it could run counter to that as well.
Rate cuts seem to be gaining momentum, regardless of this policy tug of war. CME FedWatch says there's a 60% chance that rate cuts will come at the September meeting.
When rate cuts happen, they lower the rates of return savers receive on high-yield savings accounts, CDs and money market accounts.
However, how rate cuts influence each savings vehicle differs. Both high-yield savings accounts and money market accounts feature variable interest rates. That means if the Fed cuts rates in the future, the rates you currently have will drop.
But CDs offer some protection from rate cuts. The rate you lock in is the rate you'll receive throughout the term of the CD.
You can find some of the best CD rates here:
How rate cuts impact mortgages
One of the benefits of rate cuts is that they can lower borrowing costs, including for mortgages. But while the Fed's decision can factor into mortgage rates, there are other variables at play, such as inflation, supply and demand, and, most importantly, the 10-year Treasury yield.
The Treasury yield is what the government pays to borrow money for a decade. When the yield goes up, the borrowing costs of the government rise too. The 10-year Treasury yield is of high concern now because of its role as an economic indicator.
If you're looking to buy a home soon, your best hope is to shop around for the most affordable rates. Remember, the Fed cut rates three times to end 2024, and mortgage rates didn't follow suit. Using this Bankrate tool helps do some of the homework for you:
The bottom line on Fed rate cuts
While it's hard to see what the future holds, it's clear there will be an eventual future without Powell in charge of the Federal Reserve, whether it's through removal or simply the end of his term. When this happens, it's reasonable to expect the president will appoint someone who will be more compliant with his objectives.
That, on its own won't guarantee rate cuts. However, many economists project that a rate cut might happen this fall. Therefore, now marks an excellent to secure higher rates of return on savings accounts or CDs before rate cuts happen.
And as always, the best time to get a mortgage is when you need one, and you can plan to refinance in the future — but make sure to shop around first.
Related content
-
Stock Market Today: Powell Rumors Spark Volatile Day for StocksStocks sold off sharply intraday after multiple reports suggested President Trump is considering firing Fed Chair Jerome Powell.
-
3 Things Dave Ramsey Says to Stop Buying — and 2 That Are Worth ItDebt-free living starts with smart choices. Here's what Ramsey says to avoid and where your money is well spent.
-
Stock Market Today: Powell Rumors Spark Volatile Day for Stocks
Stocks sold off sharply intraday after multiple reports suggested President Trump is considering firing Fed Chair Jerome Powell.
-
3 Things Dave Ramsey Says to Stop Buying — and 2 That Are Worth It
Debt-free living starts with smart choices. Here's what Ramsey says to avoid and where your money is well spent.
-
Callable CDs Have High Rates: We Still Don't Recommend You Get ThemInvestors must carefully consider the trade-offs, as falling interest rates could lead to reinvestment at a lower yield and make selling on the secondary market difficult.
-
Five Big Beautiful Bill Changes and How Wealthy Retirees Can BenefitHere's how wealthy retirees can plan for the changes in the new tax legislation, including what it means for tax rates, the SALT cap, charitable giving, estate taxes and other deductions and credits.
-
Portfolio Manager Busts Five Myths About International InvestingThese common misconceptions lead many investors to overlook international markets, but embracing global diversification can enhance portfolio resilience and unlock long-term growth.
-
This is the Best CD to Get Amid Rate UncertaintyThis CD helps you earn more than 4%, with quick access to your cash if you need it.
-
Stock Market Today: Nasdaq Hits a New High as Nvidia SoarsA big day for Nvidia boosted the Nasdaq, but bank stocks created headwinds for the S&P 500.
-
Is It Time to Cut the Cord on Your Landline?With rising costs and evolving technology, many are rethinking their home phone service. Here's how to decide if it's time to let go.
