Powell: The Federal Reserve Cannot Control the Direction of Mortgage Rates

Federal Reserve Chairman Jerome Powell was asked on Wednesday afternoon why Americans should endure mortgage rates around 7%. In his response, Powell pointed out that the Federal Reserve cannot control the direction of mortgage rates — the federal funds rate directly affects some savings and borrowing rates, but mortgage rates are more closely tied to the yield on 10-year U.S. Treasury bonds. U.S. President Trump stated on his social media platform on Wednesday that the Federal Reserve should "allow people to buy homes and refinance!" However, even if the Federal Reserve cuts interest rates, it will not be a panacea for the housing market issues. Since the subprime crisis, there has been a long-term shortage of housing in the U.S. With rising building material costs, coupled with the forced eviction of foreign workers who make up a key part of the industry’s labor force, the housing inventory shortage has become increasingly severe. It is also worth noting that after the Federal Reserve began cutting interest rates last year, mortgage rates did not decrease; instead, they rose