Fed should defy Trump with rate rise, top economists say
Source: FT World ↗ (cross-verified by 2 outlets — full list below)
Mortgage rates have surged in September, with 30‑year conforming loans averaging 7.28%, up 22 basis points over the past two weeks, while 30‑year jumbo and FHA loans rose to 7.47% and 6.86% respectively. The climb reflects Treasury yields nearing 5% and a market consensus that the Federal Reserve will lift its policy rate by 25 basis points this week, moving the federal funds range to 3.75%‑4%. Economists note that a hike could stabilize inflation expectations and, paradoxically, help mortgage rates in the short term, though the immediate effect has been higher borrowing costs for prospective homebuyers.
The rate increase follows a prolonged period of low rates earlier in the year, when 30‑year fixed mortgages fell to 5.75% for well‑qualified borrowers. Inflation remains well above the Fed’s 2% target, with August’s CPI showing a 3.4% year‑over‑year rise and core inflation up 2.4%, while employment stays robust. Fed officials—including Beth Hammack, Neel Kashkari and Lorie Logan—supported a July vote for a 25‑basis‑point hike, signaling a shift toward a “higher‑for‑longer” stance. Market participants, using tools like CME Group’s FedWatch, see a 92% probability of a hike, and senior economists such as Sam Williamson of First American stress that bond‑market volatility, especially the near‑5% 10‑year Treasury yield, is the primary driver of the mortgage‑rate surge.
Reactions to the impending hike are mixed. Melissa Cohn of William Raveis Mortgage argues that a firmer Fed stance could ultimately lower rates by reassuring bond investors, while also criticizing Treasury Secretary Scott Bessent’s $6 billion long‑term bond buyback as politically timed and ineffective, noting that yields rose further after the announcement. Williamson adds that lasting relief for borrowers hinges on reducing inflation, as tighter policy may eventually convince investors that price pressures are abating, but for now higher incomes and modestly cooling home prices only modestly offset the affordability squeeze caused by rising mortgage costs.
⚡ Effects Interpreter
🌍World Economylow impact
What this means for you
- ▶The global growth story might get a modest rewrite after this.
- ▶Currency desks usually move first, long before economists publish anything.
🏙️Local Economymedium impact
What this means for you
- ▶The weekly shop is where these changes usually show up first.
- ▶Wages and hiring nearby can bend with the wider economy.
🏦Rates & Bankslow impact
What this means for you
- ▶Financial markets sometimes overreact to rate speculation before banks even respond.
- ▶A modest drift in borrowing costs is more plausible than a sharp jump.
❤️Healthmedium impact
What this means for you
- ▶Checking in on vulnerable neighbours matters when news feels heavy.
- ▶Local wellbeing services are there precisely for moments when news feels overwhelming.
💷Wealthlow impact
What this means for you
- ▶It may be worth a brief look at your ISA or pension in the coming days.
- ▶A calm head usually serves savers better than a brief reaction.
🏠Housingmedium impact
What this means for you
- ▶The property market tends to move slowly, so expect any change to take time.
- ▶Local surveyors often note that sentiment shifts before prices actually do.
🌍 Effects for your country
The U.S.'s central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The U.S.'s economy is growing at 2.3% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the U.S.'s own central bank rate closely. With the U.S.'s unemployment at 4.4%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the U.S. depends more on local healthcare capacity than the figures above.
The UK's central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The UK's economy is growing at 0.8% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UK's own central bank rate closely. With the UK's unemployment at 5.6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the UK depends more on local healthcare capacity than the figures above.
France's central bank rate currently stands at 2%, so a global rates move like this could feed through to local borrowing costs. France's economy is growing at 0.9% with inflation at 1.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track France's own central bank rate closely. With France's unemployment at 7.9%, personal-finance effects like this land on a labour market that is already under strain. Health-system effects are harder to localise from economic indicators alone — the real impact in France depends more on local healthcare capacity than the figures above.
Romania's central bank rate currently stands at 6.5%, so a global rates move like this could feed through to local borrowing costs. Romania's economy is growing at 0.7% with inflation at 7.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track Romania's own central bank rate closely. With Romania's unemployment at 6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in Romania depends more on local healthcare capacity than the figures above.
The UAE's central bank rate currently stands at 3.65%, so a global rates move like this could feed through to local borrowing costs. The UAE's economy is growing at 3.1% with inflation at 2.5%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UAE's own central bank rate closely. Health-system effects are harder to localise from economic indicators alone — the real impact in the UAE depends more on local healthcare capacity than the figures above.