**Trump Version QE: Bypassing the Federal Reserve and Directly Using Government-Controlled Financial Giants (Fannie Mae, Freddie Mac, aka GSEs) for Targeted Liquidity Injection.**
Trump directs Fannie Mae and Freddie Mac (GSEs) through executive order to deploy $20 billion, purchasing mortgage-backed securities (MBS), to lower mortgage rates and make home purchases cheaper.
**The Federal Reserve's Dilemma:** If inflation doesn't decline, the Federal Reserve should maintain high interest rates. **Trump's Unconventional Move:** Using administrative means to forcibly lower mortgage rates.
**Resulting Consequences:** Conducted through administrative measures, creating a polarization of expansionary fiscal policy and tight monetary policy. Mortgage rates decline, homebuying demand is stimulated, and home prices may actually rise (due to supply not keeping pace). However, this could potentially evolve into structural inflation, forcing the Federal Reserve to maintain high interest rates in other sectors.
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**Trump Version QE: Bypassing the Federal Reserve and Directly Using Government-Controlled Financial Giants (Fannie Mae, Freddie Mac, aka GSEs) for Targeted Liquidity Injection.**
Trump directs Fannie Mae and Freddie Mac (GSEs) through executive order to deploy $20 billion, purchasing mortgage-backed securities (MBS), to lower mortgage rates and make home purchases cheaper.
**The Federal Reserve's Dilemma:** If inflation doesn't decline, the Federal Reserve should maintain high interest rates.
**Trump's Unconventional Move:** Using administrative means to forcibly lower mortgage rates.
**Resulting Consequences:** Conducted through administrative measures, creating a polarization of expansionary fiscal policy and tight monetary policy. Mortgage rates decline, homebuying demand is stimulated, and home prices may actually rise (due to supply not keeping pace). However, this could potentially evolve into structural inflation, forcing the Federal Reserve to maintain high interest rates in other sectors.