Central bankers debated multiple factors, leaving mortgage pros watching for clear signals
The debate over the Federal Reserve’s next steps intensified this week, with top officials offering different views on the pace and scale of interest rate cuts—a decision with direct consequences for the mortgage industry and broader United States economy.
Federal Reserve Governor Stephen Miran argued for a swift and aggressive approach, pointing to the bond market’s muted reaction to recent policy moves as evidence that “it supports a swift move down in rates.”
Speaking at the Managed Funds Association in New York, Miran said, “I would actually argue that the bond market behavior last year bore out my argument that rates needed to be higher, and this year, thus far, it is again bearing out my argument for a swift pace of easing.”
He called for a series of 50-basis-point cuts, contending that inflation is moderating and that the Fed’s current stance is “very restrictive.”
Miran also addressed concerns about the reliability of government data amid a federal shutdown and recent leadership changes at the Bureau of Labor Statistics. “People have to believe that the data are reflective of the true state of the economy and not... doctored to achieve a particular political outcome,” he said.
However, not all policymakers are on board with rapid easing. Minneapolis Fed President Neel Kashkari warned that the economy would "have a burst of high inflation," due to drastic rate cuts.
During a panel hosted by the Minnesota Star Tribune, Kashkari said, “If you try to drive the economy faster than its potential to grow and its potential to produce prices, you end up just going up across the economy.”
Kashkari highlighted mixed signals in the economy, noting that “the labor market appears to be weakening,” while inflation could remain “elevated for a year or two close to 3%,” above the Fed’s 2% target. He added, “It’s too soon to know what is gonna happen,” and flagged tariffs as a complicating factor for inflation.
The mortgage industry has been watching the Fed for signs of rate cuts, which usually mean cheaper loans. But Kashkari warned that even if the Fed lowers rates, mortgage rates might not fall. He pointed out that heavy investment in AI data centers could actually push borrowing costs up.
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