“I think you’re going to see rates kind of stay in the 6.25% to 6.5% range for the rest of the year anyway,” Green told Mortgage Professional America. “The soonest you could kind of expect a rate cut would probably be December. That’s probably the soonest you’d see one anyway.”
Effects of balance sheet changes
Green said the task force on the balance sheet is the one he is watching most closely coming out of June’s meeting.
“You still have a very large balance sheet that the Fed is still managing, and it still has a lot of mortgage-backed securities on it,” he said. “The question is, are they going to want to wind that down differently than the pace they’ve had so far, and what impact does that have on interest rates?”
A rapid wind-down is unlikely given the risks involved, Green said. The Fed and the administration are also unlikely to move in contradictory directions.
“It would make no sense on the one hand for the administration to be buying bonds at the Fannie and Freddie level, but selling bonds at the Fed level,” he said. “I think that you will see coordination on that. So I don’t really see the balance sheet issue becoming much of a lever in the short run in terms of interest rates at all.”
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