Fed's Miran: I think it's appropriate to cut interest rates - Fox Business

Well to a degree that makes sense; however if inflation is the mandate then it’s a dichotomy for existing Fed members be they academics or not .

The Fed was politicised decades ago and its credibility is now even under more scrutiny with the likes of Miran and now Warsh on the board . Personally I think they should raise rates , take the risk and stop bailing out the financial markets, this should have occurred after Lehmans

I suppose the real question is whether the mandate is: "maximum employment AND 2% inflation" or "maximum employment WITH 2% inflation". That one little word could make all the difference.

"with" suggests labor (to a degree) can (should?) be sacrificed in order to get down to 2% inflation.

Miran could be right, higher rates could be hurting job growth....but if the inflation stayed at 3%+ and jobs were a bit stronger, the objective of the FED wouldn't be met.

It's all likely academic though. You can't have a "magic" number for an economy as large at the US and expect to hit it on the nose. Targets are just that.

The big challenge, IMO, for the FED is looking at data (data dependent) and yet knowing current events that have not yet been reflected in data can/will have some impact on that data. It's like Trump saying "oil will plummet once the war is over". Or, as pertains to this morning, we all "expect" the consumer confidence numbers to be lower but spike higher during the next report with the war over and gas prices falling....

....but you are either data dependent (backward looking) and "slow to act/too late" or forecast dependent (forward looking) and have to constantly adjust your position "cut today/hike tomorrow".

Damned if you do, damned if you don't I guess. That's probably why there are many voting members on the board. It gives a broader view across various mindsets and geographical areas.



Meanwhile, none of it matters because semiconductor stocks are up and, well, we all know tech never goes down....so the world will continue to buy every single 50 point drop in the /nq.

To be fair, housing prices across the board shot up an INSANE amount during COVID. Probably best that they remain somewhat stagnant for a while. I don't know if it was the same globally, but here in the states, certain areas were seeing 2x price increases y/y. Homes were selling before listed on the market for 20-30% above "ask" for cash, no contingencies. It was a ridiculous move that needed to be flattened out a bit.

That said, I don't know how to look at historical averages and see how close we are to the average growth rate....but it can't be that far off if looking at a moving average rather than a simple m/m or even y/y change.

It's not so much about the mortgage rates as it is about the overall affordability of housing. Compare the two charts:

https://fred.stlouisfed.org/series/MORTGAGE30US

https://www.macrotrends.net/1314/hou...storical-chart

Mortgage rates were higher than they are now in all of pre-2000 USA, but housing starts in many years were way more than now, also. In 1980-1990, you could buy houses almost anywhere (except the most expensive cities maybe) for $20k-$40k. I know lots of people who bought houses back then for < $15k, with mortgages as high as 18%.

New construced typical sfr in the USA now will be $400k or more, $600k in some places. The cost of housing has steeply outstripped the average American's earnings.

Where higher rates really bite is in rates that developers have to pay. Land developers are paying up to 10% for new projects, some of which will take 2-3 years to complete. So, if it's expensive to do the projects and the number of buyers who can afford to buy the new housing is dwindling, you can see why housing starts are a lot lower, compared to periods during the last decades.