US Midterm Elections and Trump Pressure Are Stopping Rate Hikes, Says Wharton Professor

Wharton finance professor Jeremy Siegel says the Federal Reserve would already be raising rates. He blames pressure from the 2026 midterm elections and President Donald Trump.

Siegel spoke after a stronger-than-expected August jobs report. Trump also posted on Truth Social, threatening to halt trade with surplus countries unless the Fed cuts rates.

August Jobs Data Shifts the Rate Debate

The US economy added 162,000 jobs in August, more than triple the recent monthly average. Unemployment held steady at 4.1%, and wage growth stayed at 3.1% year over year.

Siegel called it a supply-driven labor market, not an overheating one. Labor-force participation rose to 61.6%, and combined revisions added 55,000 jobs to June and July.

That pushed traders to raise bets on a rate hike over a cut. The shift applies to this month’s Federal Open Market Committee (FOMC) meeting.

It marks a reversal from expectations after a weak July payrolls report.

Trump’s Threat Meets a Hawkish Fed

Trump’s Friday post repeated a demand he has made for months.

“We should have the LOWEST INTEREST RATES of any country in the World … CUT INTEREST RATES OR I WILL STOP TRADING WITH COUNTRIES WHERE WE HAVE A DEFICIT.”

Trump wrote the post on Friday, as Reuters first reported. He has repeatedly pressured the Fed to cut rates this year.

Siegel said the midterms give Trump added incentive to keep borrowing costs low. That makes a September hike politically fraught for the White House.

Fed Chair Kevin Warsh has given no such signal. Siegel pointed to M2 money supply growth of about 10% since the Iran conflict began.

That conflict, a brief war between the US and Iran, ended in June. He called the growth pace excessive.

He noted Warsh had flagged money supply as a key metric during his Jackson Hole address last month.

Siegel expects a hike would trigger only a brief negative market reaction. Traders would likely welcome the Fed defending its inflation-fighting credibility, so long as tariffs stay contained.

This week’s producer and consumer price index reports, due Thursday and Friday, should help settle the debate.