Finance
The Federal Reserve's primary tool for influencing mortgage interest rates is:
ASetting maximum mortgage rates by law
BAdjusting the federal funds rate, which influences overall interest rate levels throughout the economy✓ Correct
CDirectly purchasing mortgages from individual borrowers
DSetting down payment requirements for all U.S. mortgages
Explanation
The Federal Reserve influences mortgage rates indirectly by adjusting the federal funds rate (the rate banks charge each other for overnight loans). When the Fed raises this rate, borrowing costs increase throughout the economy, pushing mortgage rates higher. The Fed also purchases mortgage-backed securities in open market operations, which directly affects mortgage availability and rates.
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