Fed announces rate hike in effort to curb soaring bond yields, mortgage rates
“The Fed needs to make sure that everyone understands that they maintain their dual mandate, and that inflation is more important right now than unemployment, because we’ve seen solid jobs numbers,” she said. “They need to put a lid on inflation and raise rates.”
Sam Williamson, senior economist at First American, said the increased pressure from the White House runs into a basic reality about how the committee operates.
“Political pressure adds to the noise, but is unlikely to alter the course of monetary policy,” Williamson told Mortgage Professional America ahead of the meeting. “The FOMC is a consensus-driven committee, and its credibility rests on keeping monetary policy tethered to the economic data. If markets perceive policy as politically driven, calls for lower rates could produce the exact opposite result by increasing inflation expectations and policy-risk premiums, pulling Treasury yields and mortgage rates along with them.”
What this means for mortgage rates
Charles Goodwin, VP and head of bridge and DSCR lending at Kiavi, said the relationship between this decision and what borrowers will actually see is more complicated than it looks.
“Given the August CPI report results indicating that inflation remains elevated, markets are increasingly expecting the Fed to raise rates by roughly 25 basis points,” Goodwin said. “While this may feel like bad news for potential homebuyers, it’s important to note that this move does not necessarily translate into an increase in mortgage rates, which are more closely tied to longer-term Treasury yields and have already absorbed some expectations for tighter monetary policy.”
