Habib is hopeful that an end to the war in the Middle East and a new Fed chair in place can set the stage for rate cuts again
Inflation was already running hot before the latest conflict in the Middle East started. US and Israeli military strikes on Iran sent energy prices surging earlier this year, and the data has been ugly since.
The Survey of Professional Forecasters, released by the Federal Reserve Bank of Philadelphia, is now projecting consumer price inflation at 6% for the second quarter of 2026. Three months ago, that same panel had penciled in 2.7%.
The 10-year Treasury yield, which mortgage rates track closely, has climbed in step. The Fed has signaled it intends to hold rates where they are, with some policymakers openly discussing the possibility of further hikes if conditions worsen.
Barry Habib, founder and CEO of MBS Highway, thinks he knows exactly how things got here. Speaking at UWM Live 2026, he blamed two things: the war in the Middle East and decisions made by former Federal Reserve Chair Jerome Powell that Habib says should never have been made.
"The last two Fed chairs that we had, Yellen and Powell, did a poor job handling the economy," Habib said. "Jerome Powell did a very poor job. All of the inflation that we had back in 2022, the reason why we saw interest rates have to rise, we could have avoided that."
Too much money into the system
Habib's case against Powell centers on a round of quantitative easing in which the Fed purchased $40 billion a month in short-term Treasuries. The money supply, already sitting at around $18.5 trillion, surged 7% to 7.5% within six months. Real economic output, meanwhile, grew only 3%. The gap between the two, Habib argued, is precisely what ignited the inflationary spiral the industry has been dealing with ever since.
"Jerome Powell was not a trained economist," Habib said. "Jerome Powell never read Milton Friedman, who said inflation is always a monetary event. We are looking at something here that we could have avoided."
Now compound that unresolved monetary overhang with surging oil prices driven by the conflict in the Middle East, and inflation has fresh fuel. With roughly 20% of the normal Persian Gulf supply disrupted, crude prices have climbed in ways that feed directly into headline inflation and mortgage rates alike.
"Does that mean inflation sticks around for a bit? Yes," Habib said. "Does that mean it pressures interest rates on mortgages a little bit? Yes."
Melissa Cohn, regional vice president of William Raveis Mortgage, put the blame squarely on the rise in inflation caused by oil price spikes. She said it will be hard for the Fed to cut rates in the current market.
"The CPI and PPI reports revealed that the rate of inflation is accelerating," Cohn said. "As the war in Iran continues, inflation will continue to rise. As such, the Fed will not be in a position to cut rates, and it is becoming increasingly likely that the next Fed move could be a rate hike. The new Fed chair, no matter how dovish he may be, has no capacity to compel the other Fed members to think that a rate cut is the right thing to do right now."
She had a similar take on what that means for borrowing costs, and she doesn’t see that changing until the conflict in the Middle East comes to an end.
"Higher prices are inflationary," she said. "Rising inflation causes the 10-year bond yield to rise and mortgage rates along with it. As long as oil prices remain elevated, mortgage rates will be as well. With no end in sight to the war, higher rates are here to stay for the foreseeable future."
A challenging road ahead
Habib is genuinely optimistic about incoming Fed Chair Kevin Warsh. He cited Warsh's time at the Fed in the mid-2000s, his role in navigating the financial crisis, and his willingness to look past short-term data swings rather than overreact to them, as he believes Powell did.
Habib believes that if things can settle down, the 30-year fixed mortgage rate could potentially fall to the 5.9% to 6.125% range.
"If you got something around 6.125%, I would not play around," he said. "I'd be in a lock and go."
The path there, he acknowledged, depends heavily on variables outside anyone's control, chiefly how long the conflict in the Middle East continues and how quickly energy markets settle. Neither question has an answer right now.
"If we can resolve this thing and oil prices can come down, and inflation starts to slow, and we work through this thing that Powell did to us with the QE, then I think there's a chance that we could see inflation come down a little bit and the Fed go ahead and lower rates,” Habib said. “Then, mortgage rates could follow suit."
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