Episode summary
Is the Fed gearing up for rate cuts or rate hikes after the war?
HousingWire Daily
· · Hosts: Sarah Wheeler · Guests: Logan Mohtashami
Summary
Logan Mohtashami said the market is trying to reconcile a 10-year Treasury yield around 4.27% with rising inflation, an oil shock, and new Fed messaging that leans against near-term rate cuts. He argued that the White House appears to want a path to “two rate cuts” or maybe three later, but that the current war-related backdrop makes that difficult. In his view, Scott Bessent’s comments may be giving cover for a wait-and-see stance while Kevin Warsh’s confirmation is still uncertain and the Fed remains divided.
He framed mortgage rates as mostly a function of Fed policy and said rates under 5.75% are hard to sustain unless the labor market breaks or the Fed openly signals more cuts. He also said the earlier move for Fannie and Freddie to buy mortgage-backed securities helped tighten spreads, but that this support has largely run its course and is “mostly done.”
Mohtashami said the real near-term risk is not housing construction but consumer spending, because higher oil prices can squeeze disposable income. He expects the coming debate to center on whether the war and higher energy costs are temporary disruptions or the start of more persistent inflation pressure.
Key takeaways
- Mohtashami said the 10-year yield near 4.27% still implies roughly neutral policy, not a new hiking cycle.
- He expects the White House to push for two more rate cuts later, but not necessarily until the war and oil shock ease.
- He said mortgage rates are unlikely to stay below 5.75% unless the labor market weakens or the Fed shifts more dovishly.
- He said Fannie and Freddie’s MBS-buying support helped spreads, but that boost is mostly over.
- He wants to watch consumption, because higher oil prices could hit service-sector spending more than investment.
Notable quotes
“as of this morning, the 10-year yield is 4.27%. We're back underneath the bowl”
“I think with commodity inflation up, um I think it'd be hard for him to maybe cut rates the first time or not”
“for me, it is always whenever the 10-year yield is near 4% or under, we're pricing in neutral policy”
“I don't know if there is another trick up their sleeves”
“very hard to get mortgage rates under 5.75% unless the labor market's broken”
How the episode opens
Welcome everyone. My guest today is lead analyst Logan Mohtashami to give us an update on what's happening at the Fed. Some very interesting things and how that might affect mortgage rates. Before we dive in, I want to say thank you to our sponsor Total Expert for making this episode possible. Logan, welcome back to the podcast.
It is wonderful to be here. Um a I another crazy week, but as of this morning, the 10-year yield is 4.27%. We're back underneath the bowl.
So, whenever we get under kind of 4.31, we're in that little bowl pattern that we were, you know, end of August, early September all the way until the war broke us out. Oil prices are down. There's a little bit of talk and then maybe somebody could get a deal going on.
And then all this Fed news came out today where Kevin Warsh is going to be doing his uh uh um getting on Congress and trying to get approved. Uh Scott Bessent came on and said, "Hey, maybe the Fed shouldn't cut rates while the Iran uh conflict is going on. And Austan Goolsbee, the head of the Chicago Fed, is like, "Hey, listen, there's going to be no rate cuts if uh inflation keeps on uh staying up here.
He was mostly talking about the war, too. So, is it Are are are the rate cuts completely out of the question cuz we're getting Kevin Warsh? I know Trump's going to want Warsh to cut right away.
Bessent is saying, "Let's just wait a little bit. And Goolsbee is, "Hey, may maybe no rate cuts if this keeps continues. So, it seems like Bessent is giving a cover for Warsh, right?
So, let let's first talk about the fact that Warsh is not a shoe-in because um you've had several senators, including uh Senator Tillis, who said he will not vote for uh Warsh to you know, join the Fed as the chairman if they're still investigating if the DOJ is still investigating the Federal Reserve and Powell.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate outlook
- rate cuts vs rate hikes
- mortgage rates
- housing market impact
- post-war economic outlook
Companies and tickers mentioned
- HousingWire
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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