Fed ‘Operation Mortgage Twist’ Would Boost Housing, Pimco Says

The Federal Reserve may be poised to resume interest-rate cuts this week, but it could do more to ease US mortgage costs and stimulate housing by using different tools involving its balance sheet, says Pacific Investment Management Co.

Even as traders fully expect the Fed to cut their short-term target by a quarter-point toward 4% this week, US mortgage rates — which are determined by the market — remain elevated above 6%, limiting the effectiveness of rate policy to stimulate housing. That’s partly a function of other central bank efforts aimed at shrinking the Fed’s vast store of bonds amassed during Covid-era quantitative easing.