What is the role of the Federal Reserve Board in relation to mortgage interest rates?

The role of the Federal Reserve Board in relation to mortgage interest rates primarily involves influencing the economy and interest rates. The Federal Reserve, as the central bank of the United States, conducts monetary policy to either stimulate economic growth or cool it down. It does this by adjusting the federal funds rate, which is the interest rate at which banks lend to each other overnight.

When the Federal Reserve raises or lowers this rate, it impacts the overall cost of borrowing throughout the economy, including mortgage rates. A lower federal funds rate generally leads to lower interest rates for mortgages, making home loans more affordable, while a higher rate can result in increased mortgage interest rates.

By managing these rates, the Federal Reserve can influence economic activity, control inflation, and aim to achieve stable employment levels, which directly affects mortgage lending and home buying. This connection makes the role of the Federal Reserve crucial in shaping the market for mortgage interest rates and overall economic conditions.