High mortgage rates are making it difficult for some potential homebuyers to afford a house, even though the Federal Reserve began cutting its main interest rate in September in order to make things easier for the economy.
Mortgage rates have followed the trend of longer-term Treasury yields, which have remained relatively high in part because the U.S. economy has remained remarkably solid and because inflation hasnโt eased as much as hoped. Tariffs threatened by President Donald Trump, along with other policies that could put upward pressure on inflation, have also caused some sharp swings for yields in the bond market.
The yield on the 10-year Treasury stayed relatively calm Wednesday and remained at 4.55 per cent from late Tuesday. It was below 3.70 per cent as recently as September and approaching 4.80 per cent within the past few weeks.
Both the bond and the stock markets have increasingly been taking Trumpโs tariffs in stride, after earlier showing much more trepidation. The hope on Wall Street is that Trump is using such threats merely as a tool to drive negotiations, and the ultimate effects wonโt be as bad as they initially appeared.
Such a calm response, though, could make things worse if conditions donโt go as Wall Street expects, or if it emboldens Trump to make even more forceful actions.
Later on Wednesday, the Fed will release the minutes from its last policy meeting, when it left its benchmark interest rate alone in January after cutting it at its previous three meetings. The Fed has signalled it may make fewer cuts this year than earlier expected, in part because of worries that inflation will remain stubbornly above its 2 per cent target.
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Cutting rates can boost the economy and juice prices for investments, but they can also give inflation more fuel.
In stock markets abroad, Londonโs FTSE 100 fell 0.6 per cent after a report showed U.K. inflation accelerated to a 10-month high. That could put pressure on the Bank of England, which had been cutting interest rates to invigorate its tepid economy.
Indexes fell more than 1 per cent in other European markets, including in France and Germany, after finishing mixed across Asia. South Koreaโs Kospi jumped 1.7 per cent, while Japanโs Nikkei 225 slipped 0.3 per cent.
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