There's a policy tug of war happening, and your savings account and mortgage is in the middle of it.
On one side, President Donald Trump is demanding the Federal Reserve cut interest rates. On the other, 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.
The struggle came to a fore this week as Powell discussed the administration's significant policy changes, notably, how tariffs were larger than anticipated and economic effects of that "will include higher inflation and slower growth," said Powell at the Economic Club of Chicago.
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This prompted Trump to express his frustrations over Powell's approach, calling him "always TOO LATE AND WRONG" in a social media post and saying his "termination cannot come fast enough!"
Can Trump fire Jerome Powell?
As things stand, technically, no, he cannot. As Powell said at the Economic Club in Chicago, 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: Humphrey's Executor vs United States. This case revolved around President Franklin Roosevelt's firing of Federal Trade Commissioner William Humphrey 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 Powell, how does it impact savings accounts?
It's no secret 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 do what he wants, by cutting rates.
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 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.
In the wake of the tariff announcement and subsequent stock market recoil, the 10-year Treasury yield rose, indicating a possible lack of confidence. That could mean even if the Fed cuts rates, mortgage rates may not necessarily come down.
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
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 means at some point in the future, you may expect rate cuts. 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.
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