The Federal Reserve doesn't set mortgage rates. Federal Reserve policies do influence the overall price of money in the marketplace as they manipulate the Federal Funds and Discount rates. The Federal Funds rate (an interest rate on overnight loans made between banks) -- and the Discount rate (a bank's cost of borrowing money from the Federal Reserve directly) both serve to increase or decrease a bank's costs of borrowing money to lend. Mortgage rates are a different story, though, anc a much more complex one. To gain a working understanding, you should read the article present in the 'recommended reading' section below.
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