New Fed Chair Kevin Warsh puts inflation first, mortgage rates may stay higher for longer
According to MarketWatch's analysis, Federal Reserve Chair Kevin Warsh signaled after his first policy meeting that bringing inflation back to target is his overriding priority. That stance implies US 30-year mortgage rates may stay near 7% for longer than home buyers had hoped. Housing officials say demand is already showing signs of stalling.
Kevin Warsh, who took over the Federal Open Market Committee gavel last week, held the policy rate at 4.25%-4.50% before telling reporters "the market needs to revise its expectations for the pace of cuts". Warsh said core consumer inflation, still running at 2.9% year-on-year, remains above target and that he favors "a patient policy stance". Treasury yields drifted higher across the short end of the curve in response.
MarketWatch data put the average 30-year fixed mortgage rate at 6.98% on the day of the announcement. Mortgage Bankers Association chief Bob Broeksmit said "Warsh's tone will reintroduce hesitation on the demand side". Housing starts fell 4% in May; the June reading is due next week.
Warsh's tone is being read as a notable shift from former chair Jerome Powell's more accommodative language. Goldman Sachs economists now pencil in just one 25-basis-point cut before Q1 2027. Other forecasters still argue that softening inflation could accelerate the Fed's hand later this year.
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