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Fed in the Crosshairs: Interest Rate Volatility Looms

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  Published in Business and Finance on Saturday, January 10th 2026 at 5:34 GMT by Newsweek

The Fed in the Crosshairs: Interest Rate Volatility Looms

The core of the concern revolves around the Federal Reserve and its monetary policy. Trump has consistently voiced his disapproval of the Fed's actions, particularly its recent interest rate hikes aimed at curbing inflation. While the President lacks direct authority to dictate interest rates - this responsibility falls to the Federal Open Market Committee (FOMC) - his ability to exert political pressure is considerable. Experts predict that a second Trump administration would amplify this pressure, potentially influencing the FOMC's decisions and contributing to increased market volatility.

"He can't tell them what to do, but he can certainly put pressure on them," explains Mark Zandi, chief economist at Moody's Analytics. While the desired outcome from Trump's perspective might be lower rates, the unpredictable consequences of such interventions are worrying. Rapid shifts in interest rates, even if perceived as positive initially, could trigger renewed inflationary pressures and destabilize the financial system.

The most immediate and tangible impact of higher or more volatile interest rates would be on mortgage affordability. With housing affordability already strained for many Americans, any upward pressure on rates could further exacerbate the problem, potentially pricing many potential buyers out of the market.

Deregulation and the Fragility of Housing Finance

Beyond interest rates, Trump's past efforts to dismantle regulations put in place after the 2008 financial crisis - specifically the Dodd-Frank Act - are raising red flags. His first term saw attempts to loosen restrictions on mortgage lenders and other financial institutions. A return to a less regulated environment, as Kevin Phillips, a former investment banker and author, suggests, could create vulnerabilities within the housing market, particularly if a future economic downturn occurs.

Furthermore, the future of government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac hangs in the balance. These entities are pivotal to the housing finance system, providing liquidity and ensuring the availability of mortgages. Any substantial changes to their operations - whether through privatization, restructuring, or alteration of their mandates - could dramatically affect mortgage rates and accessibility. "The GSEs are essential to the housing market," states Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, highlighting their crucial role.

Potential for a Housing Market Slowdown

While acknowledging the inherent unpredictability of economic forecasts, the overall consensus among experts leans towards caution. The combination of potential interest rate pressures, the risk of reduced affordability, and the uncertainty surrounding regulatory changes creates a perfect storm of challenges for the U.S. housing market.

"I think there's a real risk of a significant slowdown in the housing market," Zandi cautions, echoing the sentiment of many within the financial sector. A slowdown wouldn't necessarily be a catastrophic crash, but it would likely involve a cooling of the current market and potentially lower home values in some areas. The extent of the slowdown would depend heavily on the specific policies implemented by a second Trump administration and how the market reacts to those changes.

Looking Ahead: Uncertainty and Preparation

Ultimately, the impact of a potential second Trump administration on the housing market remains clouded in uncertainty. However, the warnings from experts are clear: a period of volatility and potential instability is likely. Prospective homebuyers, current homeowners, and investors alike should carefully monitor developments and prepare for a potentially turbulent economic landscape. The coming months leading up to the election will be critical in shaping expectations and understanding the potential trajectory of the U.S. housing market.