- Reducing the compressed interest rate You will not reduce mortgage rates. An economist said he could do the opposite. If there is a doubt about the independence of the central bank – whether it is a political neutral and committed to its double delegation of stable prices and the maximum employment – it may lead to more chaos in the bond market. This is likely to increase the treasury rates for 10 years, and sends mortgage rates.
Stock prices are escalating by simply voting by President Donald Trump from his comprehensive introductory system on the so -called “Liberation Day”. But a Selling bonds He caught his attention (although he Deny He), and put some Ice definitions. This sale is sent in long -term revenues to the height wealth Sean Tawouli booksTrump “is obsessed with the rates on the treasury bonds for 10 years” because it affects the mortgage rates-and promised to make America at reasonable prices again.
The President has repeatedly called on the central bank to reduce interest rates, but the White House causes it Reduce It can do one thing that may not want it: pushing the mortgage rates.
“The president who puts this pressure on the federal reserve will not actually achieve his goal, if his goal is less than the mortgage rates,” said Chen Zhao, head of Economy Research at Redvin. luck. The White House did not immediately respond to a request for comment.
On April 21, Trump to publish On social media, it informs the federal reserve of reducing interest rates to stop the slowdown because inflation is no longer a problem for him. The President of the Federal Reserve, Jerome Powell, called “Al -Sayed after it is too late” and “the main loser”. A few days ago, Trump published this Powell ending It cannot come quickly enough, but since then Benn. However, Trump wants low interest rates. At the same time that he said he does not intend to launch Powell, he said: “This is an ideal time to reduce interest rates.”
But the reduction in the rate of benefits is not the answer to low mortgage rates, and the compressed reduction may lead to the worst things. It should not be surprising that the high mortgage rates will not be good for the world of housing that currently stops. House sales It is not far from the levels seen in the wake of the great financial crisis because many people buy or sell. Potential buyers have the costs of this because homes and mortgage rates are already high, and potential sellers do not leave because they do not want to lose low mortgage rate.
Federal funds are not directly related to mortgage rates. He is a treasury husband for 10 years, and the spread between the two is higher than usual due to the volatility of the tariff that resulted in Rose callsFears of inflation and anxiety are slow. The federal reserve in waiting and vision is because the customs tariff can stimulate inflation, spending on slow consumers and investment of business. However, Trump’s comments on the Federal Reserve and its chair prompted discussions about the relationship between the White House and the central bank.
“If we think there is a threat to feed independence, this is a kind of other point in the camp of more chaos, less faithful to the United States,” said Zhao.
She later said: “There is an idea that you can force the federal reserve to reduce, then if they reduce, this means that mortgage rates should decrease mechanically, but this is not what happens.” “Because the Federal Reserve only controls the rate of federal reserve funds. Everything is determined by the markets.”
If the central bank is forced to reduce, investors – and therefore markets – do not see the federal reserve that is politically neutral. The lack of confidence in the Federal Reserve and its commitment to its double mandate to monitor stable prices and the maximum employment, can once again lead to sales in the bond market and send increasing returns. In addition, investors may expect the worsening economy, especially the stagnation economy, a bad mixture of high inflation and stagnant growth. This will pay for long -term interest rates, too, because a lot in terms of long -term interest rates are determined by what the bond market is pricing.
Before the Federal Reserve reduced the main interest rate for the first time in September 2024 after curbing inflation in the epidemic, real estate mortgage rates decreased. they Decline Motivated by expecting a rate reduction, more than reduce itself. Similar thing to the election president also won: Expectation From Trump’s victory, he sent the mortgage prices because people were betting on a second term that would come with a more hot inflation.
in Note search After the judiciary, a Vi Mai Senior economic analysts wrote that the price of federal funds is the interest rate in which banks lend money to each other overnight: a short -term interest rate. Mortgage rates, on the other hand, are long -term rates that are determined in the bond market. The analyst said that the 30 -year mortgage rate was registered at the treasury note for 10 years, which was set by investor expectations, so when the rate moves in the treasury notes for a period of 10 years, the mortgage rates are their example. In separate Note, Senior economists in Richmond Richmond wrote a widespread between treasury and mortgage prices for a period of 10 years, which tends to increase sharply in times of economic tension.
If the Federal Reserve Bank reduces interest rates next month at its next meeting (after Powell to caution The Trump’s induction agenda can enter the recession and maintain a Cautious approach To monetary policy) it can send a message to bond investors.
“The markets may say, well, at some point in the future, it will be very bad … The patient will get sick to the point that we must apply more medications,” Zhao explained. “If this happens, this means that we must take much more prices than we will get.”
This story was originally shown on Fortune.com
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