‘s long-standing inflation goal of 2% annually. The central bank celebrated by delivering a supersized cut in the federal funds rate, the rate at which banks are charged for overnight borrowing from lenders of last resort., and in this case, it theoretically slashed them. But as evidenced by the unrelenting mortgage market, there are limitations to how the Fed’s rate cuts for banks translate into lower borrowing costs for consumers.
But Treasury yields, like mortgage rates, have also moved opposed to the Fed’s intentions: The 10-year Treasury yield has skyrocketed from a nadir of 3.62% to more than 4.3%. That range spans from its lowest interest rate in over a year to one of itsThe news conference of Federal’ Reserve Chair Jerome Powell appears on a screen as trader Neil Catania works on the floor of the New York Stock Exchange, Wednesday, Sept. 18, 2024.
The bond market may reflect concerns about the trajectory of federal spending that goes well beyond the 2024 election. Yet why would the cost of borrowing to buy a home go up while the federal funds rate goes down? Because the demand for housing remains white hot while supply remains woefully behind.