Economic policy shift possible as Federal Reserve contemplates reducing interest rates due to dwindling employment figures
The Federal Reserve is currently contemplating the decision to lower mortgage rates, as hiring in the U.S. economy slows and inflation remains above its 2% target. Chairman Jerome Powell has pointed to a softening job market as a reason the Fed may vote to cut mortgage rates.
At the Fed's last meeting in late July, two members dissented, marking the first time in 30 years that two opposing votes were cast on the same decision. The two dissenting votes came from Esther George and Christopher Waller.
Powell has expressed concern over elevated inflation, which surged to 9% in 2022, prompting the Fed to implement its highest federal mortgage rate in two decades. Lowering mortgage rates can help fuel job growth, according to Powell, but it can also lead to higher inflation, as he has noted.
The Federal Open Market Committee (FOMC) of the Federal Reserve began a two-day meeting on Tuesday to discuss potential mortgage rate changes. The Senate recently confirmed former Trump administration economic adviser Stephen Miran to the Federal Reserve board, which may impact the committee's decision.
President Trump has openly criticized the Federal Reserve for not lowering mortgage rates in 2025. However, Powell does not have the power to raise or lower mortgage rates alone. The expected outcome of the meetings is the approval of lowering mortgage rates, which could help combat the slowing economy and provide a boost to job growth.
Powell has also suggested that new tariffs on imported goods could raise inflation. A court recently rejected President Donald Trump's bid to remove Commissioner Lisa Cook from the Federal Reserve board, ensuring her continued involvement in the decision-making process.
As the FOMC deliberates on the future of mortgage rates, the balance of risks is shifting between employment and price stability, according to Powell. The Fed's decision could have significant implications for the U.S. economy and its job market.
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