For those hoping for a reprieve from soaring mortgage and credit card rates, the news is grim

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The Federal Reserve, custodian of the nation’s monetary policy, stands as a sentinel against inflationary pressures, steadfast in its resolve to keep benchmark interest rates steady. But for borrowers eagerly anticipating a downturn in rates, this stance offers little solace. With inflation still stubbornly above the Fed’s target rate of 2%, the prospect of rate cuts remains a distant hope.

Inflation, while showing signs of moderating from its peak, continues to cast a long shadow over the economic landscape. Despite recent decreases in the annual inflation rate, which now stands at 3.4%, the road to stability remains fraught with uncertainty. With the Fed’s benchmark lending rate at its highest in 23 years, borrowers find themselves navigating treacherous waters, with little relief in sight.

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Forecasts paint a grim picture, with modest rate cuts anticipated by year’s end, bringing the federal funds rate to 4.75% to 5%. Yet, even these adjustments offer scant comfort, as projections indicate a high likelihood of rates remaining above 4% through 2025 and beyond.

But it’s not just mortgages feeling the squeeze. US officials sound the alarm on the mortgage industry, warning of potential cascading failures that could exacerbate the next recession. Nonbank mortgage companies, heavily exposed to market swings and lacking the stable deposits of traditional banks, pose a significant risk to financial stability. With these companies originating the majority of US mortgages, the potential for turmoil in the event of a crisis cannot be overstated.

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