- Pressure of pressurized interest rates does not actually reduce the interest rates of the mortgage. The opposite could be done, the economist said. If there is a suspicion of the independence of the central bank – be it politically neutral and dedicated to its double stable prices and maximum employment mandate – it can cause more chaos in the bond market. This is likely to push interest rates for 10-year-old treasury and would send mortgage interest rates dramatically.
Stock prices spirals when President Donald Trump announced his extensive tariff mode on the so -called release day. But it seemed to be the sale of bonds to his attention (although he deny That) and he put some tariffs on the ice. This sale sent long -term yields and AS Treasure Shawn Tully wrote that Trump “is obsessed with the interest rates of 10-year-old government bonds,” as it affects the define and the mortgage of the mortgages promised to make America affordable again.
The President has called the central bank over and over again to tilt interest rates, but the white house caused evaluate One could do one thing he probably doesn't want: push the mortgage interest rates.
“The President who would put this pressure on FED would not actually achieve his goal if his goal is to lower mortgage interest rates,” said Chen Zhao, Head of Research at Redfin Economics TreasureTo. The White House did not immediately respond to the comment application.
On April 21, Trump posted In social media, the Federal Reserve ordered to reduce interest rates to stop slowing, as inflation was no longer a problem for him. He named FED director Jerome Powell's “Mr Too Hilja” and “Great Loser”. Days earlier posted Trump that Powell's graduation couldn't come fast enough but have since changed his voiceTo. However, Trump wants lower interest rates. The moment he said he was not going to dismiss Powell, he said, “This is the perfect time to lower interest rates.”
However, cutting interest rate is not really the answer to the rates of lower mortgage loans, and pressurized cutting can make things worse. Not surprisingly, higher mortgage interest rates are not for a good housing world that is currently standing. Home sales are not far from the levels seen after a major financial crisis, because many people do not buy or sell. Possible buyers cannot afford it, as home prices and high mortgage interest rates are already so high and future sellers will not let go because they do not want to lose their much lower mortgage loan.
The interest rate of federal funds is not directly related to mortgage interest rates. This is a pair of prices for 10-year-old treasury mortgage loans, and the distribution between the two is higher than usual, as tariff volatility caused recession speeches, inflationary scars and slows down anxiety. Fed is in standby mode as tariffs can induce inflation and slow consumer spending and business investments. However, Trump's comments have been motivated by Fed and this chair discussions on the relationship between the White House and the Central Bank.
“If we think feeding independence is a danger, it is a kind of point in more chaos camp, less faith in the United States,” Zhao said, and it may rise to the rise of 10-year-old treasury and mortgage interest rates.
“There is the notion that you can force Fed to cut, and when they cut, that means that mortgage interest rates must mechanically come down, but that is not just what happens,” she later said. “Because Fed only checks that one Fed Funds interest rate is. Everything else is determined by the markets.”
If the central bank is forced to cut, investors and thus will not see it in the markets as federal politically neutral. The lack of confidence in Fed and his commitment to their dual authority to achieve stable prices and maximum employment can be triggered by the sale of the bond market and sending yields. In addition, investors may provide for a worsening economy, especially what stagflation, a nasty mixture of high inflation and stagnant growth. It would also raise long -term interest rates higher, as so much where long -term rates are set is related to what the bond market values.
Before Fed first reduced its main interest rate in September 2024, after the pandemic-era inflation, the interest rates of mortgage fell. They fell out of the expectation of speed cuts, more than the passage itself. Something similar happened before the President's election victory: waiting for Trump to win sent the mortgage clips as people contributed to the hotter inflation in another term.
A research Post-Cut wrote by Fannie Mae's senior economic analyst that the interest rate of federal funds is the interest rate where banks borrow money overnight to each other: a short-term interest rate. The interest rates of mortgage loans are, on the other hand, long -term interest rates determined in the bond market. The 30-year mortgage rate is compared to the 10-year Treasury Note set by investors' expectations, so that when the interest rate of the 10-year-old Treasury is moving, the interest rates of mortgage are followed. Separately Note, Richmond Fed Senior Economist wrote a sharply between the 10-year-old Treasury and the interest of mortgage loans during the increased economic stress.
Should Fed reduce interest rates next month next month (after Powell warned that the agenda of Trump's tariffs could trigger the Stagflation era and maintain a careful approach to monetary policy), he could send a message to bond investors.
“Markets can say that in the future it will be so bad at some point … The patient becomes so ill that we need to take even more medications,” Zhao explained. “If that happens, that means we have to take a lot more prices than we would otherwise.”
This story was originally reflected on Fortune.com
