The pressure on the Fed continues, with another Fed Governor now in Trump's crosshairs.
As we head into Powell's Jackson Hole speech on Friday, let's take a look at how the Fed's overly restrictive policy stance is impacting consumer rates.
The average 30-year fixed mortgage rate is 6.6%. Relative to the 10-year yield, the spread is about 230 basis points. Historically, that spread has run closer to 150-175 basis points — which would put mortgage rates more like 5.7%–6%.
Average credit cards rates are 17 percentage points above the 10-year yield. It's historically closer to a spread of 10.
So, there's a premium in both of these key consumer debt markets relative to the historical average.
But it's not about credit worthiness. That's at record highs …
It’s about perception.
And that perception has been shaped by the Fed, through "forward guidance."
By continuing to talk UP the risks of tariffs, inflation, and higher-for-longer rates, it appears that they’ve effectively convinced lenders to demand a higher premium than the data would otherwise justify.
