Iowa voters feel the pinch as Fed hikes rates, inflation persists under Trump policies

Iowa families are feeling the squeeze as the Federal Reserve raises interest rates to combat inflation, a move that comes with real consequences for farmers, homebuyers, and anyone carrying debt. The decision, made unanimously by the Federal Open Markets Committee on Wednesday, directly contradicts President Donald Trump's repeated claims that prices are falling across the board.

For Iowa's agricultural community, the timing could not be worse. Farmers are already contending with record diesel prices and a surge in fertilizer costs. The USDA this week forecast a reduction in farm income for the year, and higher interest payments only add to the burden.

What the Fed's rate hike means for Iowans

The Fed's decision to raise rates will not bring down the cost of housing, buying a car, or paying off credit card debt. It is also designed to slow down the economy, which could lead to job cuts in the months ahead.

While Trump opposed the rate hike, he will have to answer for any economic impact, even if his war on Iran and tariff policy helped create the inflation that led to it.

Fed Chair Kevin Warsh, whom Trump nominated and described in January as coming from 'central casting' for the job, acknowledged the reality that Americans feel every day.

'This summer's inflation readings do not tell me that underlying trends have meaningfully improved,' Warsh said at a press conference Wednesday, arguing inflation has been hurting the country for five years.

Warsh's Fed is expected to raise interest rates again this year, with the next opportunity in late October, just before Election Day.

Trump's claims clash with economic reality

During his convention speech to Republicans last week in Dallas, Trump said 'almost every item' is getting cheaper. After the Fed's decision Wednesday, Trump took to social media to argue that rates should be much lower because the US economy is 'BOOMING.'

Even Vice President JD Vance seemed to acknowledge in a podcast interview Wednesday that things are not exactly going to plan.

'Give us another chance,' Vance said, when asked for his message to voters before November.

Iowa Senate race heats up as Democrats target the economy

Those economy numbers have a lot to do with why Democrats feel competitive in Senate races that once seemed safe for Republicans, particularly in heartland states like Kansas and Iowa. Democratic candidate Josh Turek in Iowa is making populist pledges to focus on housing and energy prices.

Meanwhile, Republican candidate Rep. Ashley Hinson is talking in ads about working across the aisle, a message that does not sound much like Trump's usual approach.

Trump policies that are driving up costs

Trump made promises to bring down costs two years ago, but the policies he pursued as president are likely making inflation worse.

• Fighting AI regulation has given Big Tech room to spend. Enormous borrowing and spending by AI companies has fueled significant inflation in chip prices, electricity and building supplies.
• Tariffs he promised and defended have made things more expensive. Rather than pull back, Trump is launching a trade war with Canada.
• His war on Iran has fuel costs rising again. Iran-backed Houthis in Yemen have attacked oil infrastructure in Saudi Arabia. The price of diesel is at a new record, hurting farmers, the trucking industry and ultimately consumers.
• High prices are expected to continue. The Congressional Budget Office set the cost of the war at $38 billion and counting in a report released this week. CBO expects the war to drive up inflation next year.
• Trump also wants to cut $5,000 checks to every American. His administration is looking for ways to do it without Congress. People would appreciate the check, but it would also drive up prices.

Trump's actions to address inflation have often angered his supporters. The Republicans running for Senate in Iowa and Kansas both channeled ranchers when they expressed frustration with Trump's decision to import more beef as a way to bring down meat prices.

What the polls say about the economy

Democrats have a clear advantage to retake the House of Representatives, according to a recent New York Times / Siena poll. The economy and inflation were among the top issues cited by registered voters in that poll.

Three-quarters of registered voters say the economy is only in fair or poor condition; 73% disapprove of Trump's handling of cost-of-living issues, and 62% disapprove of his handling of the economy in general.

House Minority Leader Hakeem Jeffries, Democrat of New York, argued that Trump promised a 'golden age' but delivered a 'rotten age.'

'The economy is not going in the right direction, it is failing everyday Americans. Gas prices are up, grocery prices are up, interest rates are up, housing costs are up, and health insurance premiums are up,' Jeffries said.

Will Trump turn on Warsh?

Trump ultimately turned on his first-term pick for Fed Chair, who he later viewed as a 'jerk' for not lowering rates on Trump's timeline. In an angry social media post after the Fed's announcement, Trump said rates should be at 1% rather than targeted between 3.75% and 4%.

Trump said he talked to Warsh before the Fed's meeting.

'I talked to Kevin and I said, you might as well vote with the board because it's not going to matter,' Trump said.

Warsh, as chairman, is but one vote on the Fed board that set rates. But Warsh kept any counsel from Trump private.

'I've got nothing for you on a discussion with the president,' he told reporters.

Warsh may yet hold Trump's trust because at heart he is thought to support rate cuts. It is just that the economic reality, at the moment, is that prices are rising.

FAQ: Inflation and the Fed rate hike explained

Why is the Fed raising interest rates?

The Fed is raising rates to combat inflation, which has been hurting American pocketbooks for years. Higher rates are designed to slow down the economy and bring prices down, but they also make borrowing more expensive.

How does the Fed rate hike affect Iowa farmers?

Iowa farmers are facing higher interest payments on top of record diesel prices and a surge in fertilizer costs. The USDA this week forecast a reduction in farm income for the year.

What can Iowans expect in the coming months?

The Fed is expected to raise rates again in late October, just before Election Day. The Congressional Budget Office expects the war on Iran to drive up inflation next year, meaning fuel prices are not coming down any time soon.