A reduction in Trump -induced interest rates will not actually reduce mortgage rates

• A reduction of pressure interest rates Will not actually lower the mortgage rates. He could do the opposite, an economist said. If there is doubts about the independence of the Central Bank, whether it is politically neutral and committed to its double term of stable prices and the maximum occupation, it could lead to more chaos in the good market. This would probably promote the rates of ten -year -old treasures and send the mortgage rates that increase.

The prices of the shares spoke up once President Donald Trump unveiled his fare regime in the so -called “Liberation Day”. But it appeared in sale of bonds caught his attention (though he denies it), and put some of them Ice rates. That sale sent long -term yields and as Fortune Shawn Tully writeTrump “is obsessed with ten -year -old treasure bonus rates” because he influences mortgage rates and promised that America would be affordable again.

The President has requested the Central Bank again and again to reduce interest rates but a white house induced by the White House reduce the price I could do something you probably don’t want: to push the mortgage rates.

“The president who pressed this Fed would not reach his goal, if his goal is the lowest mortgage rate,” said Chen Zhao, responsible for Research of Redfin Economics. Fortune. The White House did not respond immediately to a comment request.

On April 21, Trump published On social media they told the Federal Reserve to reduce interest rates to stop a slowdown as inflation was no longer a problem for him. He called the President of the Fed Jerome Powell “Mr. Too Late” and “A major loser”. Days earlier, Trump published this Powell termination couldn’t get fast enough but since then changed his melody. However, Trump wants lower interest rates. The same time he said he has no intention of shooting Powell, he said: “This is a perfect time to reduce interest rates.”

But the reduction in interest rate is not really the response to the lower mortgage rates, and a pressure could worse. It should not be surprised that the highest mortgage rates are not good for a housing world that is currently stopped. Sales of houses They are not far from the levels seen in the wake of the great financial crisis because not many people buy or sell. Buyers cannot afford, because high -home prices and high mortgage rates are already so high, and sellers will not let go because they do not want to lose a much lower mortgage rate.

The federal background rate is not directly connected to the mortgage rates. These are the mortgage rates of the ten years, and the propagation between the two is higher than usual due to the tariff volatility that occurs Call the recessionInflation fear and slowing anxiety. The FED is in a wait mode and as the rates could induce consumer inflation and spending and business investment. However, Trump’s comments over the Fed and his chair have promoted discussions about the relationship between the White House and the Central Bank.

“If we think there is a threat to fueling independence, this is another point in the camp of more chaos, less faith in the United States,” Zhao said, and this could push the rates to ten -year -old treasures and increase mortgage rates.

“There is this notion that the FED can force to cut it -and, if it is reduced, it means that the mortgage rates have to go down mechanically, but this is not what happens,” he said later. “Because the Fed only controls this fed background rate. Everything else is determined by markets.”

If the Central Bank is forced to cut, the investors and, therefore, the markets do not see the Fed as politically neutral. The lack of confidence in the Fed and its commitment to its double mandate of pursuing stable prices and maximum employment, could re -cause a sale to the good market and send yields. In addition, investors can foresee a worsening economy, particularly marked by stagflation, an unpleasant mix of high inflation and stagnant growth. This would also increase long -term interest rates, as most of the long -term rates are put to do with the price of the good market.

Before the FED reduced its key interest rate for the first time in September 2024, after reinstating inflation from the pandemic time, mortgage rates fell. Them kick For forecasting a reduction in rates, more than the same. Something similar also happened before the President’s election victory: the anticipation From a Trump victory he sent the mortgage rates that increase because people opted that a second term would come with a hotter inflation.

In a Investigation Note post-tet, to Fannie Mae The Higher Economic Analyst wrote that the federal fund rate is the interest rate in which banks give money to each other at night: a short -term interest rate. Mortgage rates, on the other hand, are long -term rates that are determined in the good market. The analyst said that the 30 -year -old mortgage rate is based on the tenor’s treasure note, set by the expectations of investors, so that when the rate of the tenor’s treasure note moves, the mortgage rates follow the demand. In a separate note, A superior economist from the Richmond FED wrote the spread between three -year duties and mortgage rates tends to increase abruptly in times of economic stress.

If the Fed had to reduce interest rates next month at the next meeting (after Powell warned Trump’s rate agenda could start in an age of paralyzing and maintained a cautious approach In monetary policy) could send a message to the investors of bonds.

“The markets could say, well, at some point in the future, it will be so bad … The patient will get so sick that we have to apply even more medicines,” said Zhao. “If this happens, that means we have to take the rates much more than we would have differently.”

This story originally presented to Fortune.com