Trump faces new inflation warning from bond markets
The world is getting more uptight about lending money to President Donald Trump’s government — causing interest rates to climb in ways that are worsening affordability pressures, hampering economic growth and creating a new risk for Republicans in November’s midterm elections.
The energy price spike triggered by the Iran war has seeped into the price of bonds that help fund the U.S. government. Interest rates on a 10-year U.S. Treasury note are topping 4.44 percent up from 3.95 percent before the war started at the end of February. Average mortgage rates have climbed to their highest levels in nine months, while auto sales are slumping.
The challenge is global in scale, as interest rates have risen for multiple countries as the world has been adjusting to the prospect of higher inflation, mounting questions about the sustainability of government debt and a dramatic surge in investment in artificial intelligence.
Trump has tried to assure Americans that he has a plan to trim the roughly $1.8 trillion annual budget deficit. In the past, he has pointed to revenue from tariffs, payments from foreigners for his “Gold Card” visa, spending cuts made by the Department of Government Efficiency, and faster economic growth. Last week, he said the fraud task force led by Vice President JD Vance would be the key to unlocking massive savings.
