Rising Rates Might Show Fed Policy is Failing

By Kyle Chezum Updated on 12/10/2010

12/10/2010

The Fed’s $600 billion purchase of Treasury bonds, called “quantitative easing,” was meant to keep mortgage rates low.  Instead, mortgage rates have risen steadily to a six-month high.  Critics are using this as evidence that the Fed’s policy is failing.

With a positive economic outlook, investors are more interested in buying stocks and have moved funds away from Treasury bonds.  This has offset the Fed’s quantitative easing and led to an increase in mortgage rates.  Still, the situation is complex.  It remains to be seen whether the spike in mortgage rates will be a lasting trend or a brief jump.

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