Download PDF File Fed Funds Rate and Mortgage Rates . I was asked to explain the correlation between Fed Rate Cuts and Mortgage rates at the last meeting; the short answer is that there is no correlation. Why?Correlation between Fed Funds Rate and Mortgage rates

I was asked to explain the correlation between Fed Rate Cuts and Mortgage rates at the last meeting; the short answer is that there is no correlation. Why? The Fed has tools at their disposal to set monetary policy; their most effective tool is setting the Federal (Fed) Funds Rate. The Fed Funds Rate is the interest rate at which private depository institutions (mostly banks) lend balances (federal funds) at the Federal Reserve to other depository institutions. By raising or lowering the Fed Funds Rate the Fed aims to achieve their goals of promoting maximum sustainable output and employment and to promote