FHFA Director Bill Pulte has called for the resignation of Federal Reserve Chairman Jerome Powell following President Trump’s recent social media post urging Powell to cut the Fed funds rate by 2.5% here.
This call comes after the Federal Reserve’s decision to keep the Fed Funds rate unchanged yesterday. Powell acknowledged the challenges in the job market but stated that the Fed is not considering rate cuts due to uncertainties surrounding tariffs, despite recent data showing headline inflation at 2.1% year-over-year. You can read more about my analysis on this decision here.
The unemployment rate is currently at a level that the Fed had previously indicated would be concerning by 2024 if it were to rise.
The Federal Reserve Acknowledges Restraint
During Wednesday’s press conference, Powell noted the challenges in the labor market but highlighted the strong labor market indicated by the unemployment rate nearing 4.2%. Despite Powell’s stance, the Fed’s policy remains restrictive rather than neutral.
Stagnation in Housing Construction
Recent housing starts data reflects a trend where growth in housing construction peaked in 2022 and has since been limited. Homebuilders appear cautious due to current mortgage rates hovering around 7%. However, a reduction to 6% could potentially boost activity in the housing market and foster nationwide growth.
Single-family construction peaked years ago
Housing starts and permits are at early COVID-19 recession levels
The Homebuilders Confidence Index is almost back to the lows of COVID-19
Recognizing the significance of residential construction in the economic cycle and job market is crucial, as job losses in this sector often precede recessions. This pattern is something that the Federal Reserve and Powell have historically overlooked in various economic cycles, which explains the push for lower interest rates by the President and Director Pulte.
It is evident that the housing market not only plays a crucial role in combating inflation through supply but also serves as a key indicator of the economic cycle.
In Conclusion
Anticipate mounting pressure on the Federal Reserve in the coming months as our economy grapples with various challenges that have led to a more passive decision-making approach from the Fed. I delve deeper into this topic in today’s HousingWire Daily podcast, where I dissect the flaw in the recent Fed meeting.
It looks like things are about to get even more intriguing!
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