The Fed is losing ammunition here. For every 25 basis point drop in mortgage rates consumers get $5 billion in spending. So say rates drop another 50 basis points injecting $10 billion into the economy (consumers spend some $11 trillion a year). There is a marginal win here for the cost of buying up nearly $500 billion in MBS over the next year. We are already seeing the hidden cost of hot money flowing into higher ed, healthcare, food, and energy.

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