FHFA Director Bill Pulte called on Federal Reserve Chairman Jerome Powell To resign Today, shortly after President Trump encouraged Powell to lower the FED fund rate by 2.5% in a social post.
This follows the decision of the Federal Reserve yesterday to keep the rate of the Fed Funds unchanged. Although Powell has currently pointed to the challenges of finding a job, he said that the FED is not going to quickly lower the rates due to uncertainty about rates. This is despite the most recent data on data from personal consumption spending (PCE) that show the head of the head of 2.1% on an annual basis. Read my opinion about that decision here.
As you can see below, the unemployment rate at a level where the Fed said in 2024 would make them uncomfortable if it started to go higher.
The Fed admits that it is still restrictive
Wednesday’s press conference was probably not the best for Powell, where he stated that the labor market is a challenge for those who are looking for a job, but the current unemployment rate, which rises to 4.2%, still indicates a strong labor market. If the Fed were to work from a more neutral policy position, Powell’s Take might be more understandable, but they are not in a neutral policy.
Housing construction is no longer growing for years
Yesterday, the Housing Data started a long -term trend: the growth cycle of housing reached its peak in 2022 and since then the progress has been quite limited. In my article I write that housing builders hesitate to issue new permits, given the current mortgage interest rate around 7%. However, a speed decrease up to 6% could stimulate the activity in the housing market and encourage national growth.
The graphs below speak for themselves!
Single -family construction peak years ago
Housing starts and permits are at early COVID-19 Recession levels
The trust index of the housing builders is almost back to the lows of COVID-19
Insight into the importance of residential construction for the economic cycle and the labor market is crucial. When employees in residential construction lose their jobs, a recession often follows. This is a pattern that the Federal Reserve and Powell tends to repeatedly overlook in various economic cycles. This insight helps explain why the president and director Pulte argue for lower interest rates.
As you can see, the housing market is not only of crucial importance to combat inflation with offer, which is the best way to deal with inflation, but also an important economic cycleinsticator.
Conclusion
Expect increasing pressure on the Federal Reserve for the next 6.5 months. Our economy faces various challenges that the Fed has confused and have led to a more passive approach in their decision -making. I discussed this in detail on today’s Housingwire Daily Podcast, where I emphasized a mistake in their thinking about the recent FED meeting.
Again, it seems that it is about to become more interesting, people!
