Donald Trump’s obsession with low interest rates is well-documented. In his world, cheap borrowing is a presidential birthright—something the Federal Reserve should deliver on command. And yet, just three weeks into his second term, his own policies are pushing rates in the opposite direction.

Treasury Secretary Scott Bessent may have promised the White House a world where the 10-year Treasury yield would miraculously fall, paving the way for lower borrowing costs. But in reality, yields are climbing, inflation expectations are rising, and investors see no relief in sight.

On Friday, bond yields rose again after the latest jobs report showed continued economic strength, rising wages, and no sign of economic weakness that would justify rate cuts from the Federal Reserve. Worse still, inflation expectations among consumers are now jumping above 4%, more than double the Fed’s 2% target—thanks in no small part to Trump’s aggressive tariff threats.

With investors factoring in more inflation, more debt, and more uncertainty, the result is simple:

• Higher bond yields make it more expensive for the US to borrow;
• A Federal Reserve with no reason to cut rates anytime soon;
• An economic outlook clouded by Trump’s self-inflicted price pressures.

Trump has spent weeks pushing for rate cuts, but his own policies are making them impossible.

• His latest tariff salvo—a 25% tax on all steel and aluminium imports—will raise business costs, squeeze margins, and push prices higher;
• His tax-cut ambitions, still vague, could widen the budget deficit, forcing the Treasury to borrow even more;
• His trade war rhetoric is fuelling uncertainty, keeping bond traders on edge and demanding higher yields to hold US debt.

This is precisely the opposite of what an administration aiming for low interest rates should be doing. Instead of calming markets, Trump is feeding inflation fears and pushing higher borrowing costs for everyone—from homeowners to businesses to the government.

The 10-year Treasury yield, a critical benchmark for mortgage rates, corporate loans, and government debt, isn’t playing along with Trump’s fantasy of cheap money.

Yes, yields have come down from their early January peak. Still, they remain nearly a percentage higher than mid-September, when markets first started pricing in Trump’s inflationary policies. Investors now expect that the Fed will keep rates on hold until at least September—a stark contrast to Trump’s demands for immediate cuts.

Even Scott Bessent, the man Trump has tasked with delivering a low-yield utopia, seems to understand the problem. In an interview last week, he admitted that the administration is working to hold down the 10-year yield rather than the Fed’s key policy rate.

This week will bring fresh Treasury auctions and another key inflation report. If the consumer price index (CPI) confirms ongoing inflationary pressures, it will only reinforce what markets already know:

• The era of cheap borrowing is over;
• Trump’s fiscal and trade policies are worsening inflation, not easing it;
• The Federal Reserve has no reason to follow Trump’s economic wish list.

Trump’s economic policies drive inflation, which keeps interest rates high. Until he recognises that, his dream of lower borrowing costs will remain just that—a dream.