Federal Reserve Chair Kevin Warsh said bringing inflation under control could help lower long-term Treasury yields and make mortgages more affordable, emphasizing the connection between price stability and household borrowing costs.
Warsh said mortgage rates remain elevated partly because inflation is still running above the Federal Reserve’s target. Successfully containing inflation, he argued, would be consistent with lower long-term interest rates and reduced financing costs for prospective homebuyers.
“Mortgages are higher than they have been in part because inflation is above the Fed’s target,” Warsh said. He added that the central bank was “not afraid of productivity-led growth,” signaling that stronger economic activity would not necessarily warrant tighter monetary policy if it were supported by productivity improvements rather than inflationary pressures.
Warsh also addressed concerns about the Federal Reserve’s independence. Asked how he would respond if President Donald Trump attempted to interfere with the central bank, Warsh said he would continue to perform his duties.
Warsh separately ruled out preferential support for individual industries during periods of financial stress, including the cryptocurrency sector.
“We want to be in a position where we aren’t bailing out anyone, including crypto,” Warsh said. “We do not want to be in the bailout business.”
His remarks came as the U.S. dollar weakened following a sharper-than-expected slowdown in June inflation, which reduced market expectations for near-term Fed rate increases. The euro and British pound strengthened against the dollar, while the Japanese yen remained near four-decade lows.
However, rising oil prices amid escalating tensions between the United States and Iran could renew inflationary pressures, potentially complicating the Fed’s policy outlook.
