How Much Power Does Trump Have Over Interest Rates?

By Motley Fool

Who can actually dictate interest rates? You might be surprised to find that the President of the United States doesn't have much power in this arena. Prospective new home buyers and refinancers alike should monitor the interest environment and this segment by Motley Fool analysts Gaby Lapera and Nathan Hamilton can help them do that. Readers can head over to the Motley Fool's mortgage site for more information on comparing mortgage rates.

A full transcript follows the video.

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This podcast was recorded on Feb. 27, 2017.

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Nathan Hamilton: I think it's important to understandwhat the President has an impact on, and what they influence,and what they probably don't have a direct impact on,specific to mortgages. Mortgages aresomewhat based on what the Fed does. President Trump,any president before and any president in the future,doesn't necessarily say what those rates are going to be. But,during the Trump presidency, the Fed hasalready come out and said, in 2017, there arelikely going to be two to three more rate increases. This ison top of what happened in December with the rate increase. So,if you're looking at refinancing,if you're looking at buying a new home, nowmight be a good time to at least look at the refinancing side of it, because rates may increase in 2017 during Trump's presidency. He can't, essentially, issue an executive order and say, "We're going to increase/decrease mortgage rates." That's not necessarily something he can influence.

Gaby Lapera:Yeah. A few things to unpack there. The Federal Reserve Board, the people who decide whether or not those interest rate increases, [is], in theory, anindependent body. So,that's why Nathan was saying that Trumpcan't really affect that directly.Additionally, the interest rate increases are part of a long trend that we've been seeing withthe recovery of the economy. That's why interest rates haven't been pushed up super highin the past few years. It's becausethey have been waiting until they saw the signs.

Hamilton:Yeah,until the economy improved quite a bit, or there were signsit was going to improve quite a bit.

Lapera:Exactly. The Fed isreally interesting. It's kind of like thismysterious shadowy body.I know that I've said this a few times, butif we had a little magic globe or crystal ball that we could look into,that would be great. But they do try and signpost like, "Yeah, we'reprobably going to raise them up/we're not going to raise them." Andthey have been saying, "Thingslook pretty goodso far, we think we're going to raise them." They're not going to be aggressive. That'ssomething to remember, they're not going to push it up by 2% points,it's going to be basis point increases.

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