The Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20220727a.htm">announced</a> on Wednesday that it raised interest rates by 75 basis points for the second straight month in an effort to help slow <a href="https://www.dailywire.com/topic/inflation">inflation</a>.
&#8220;The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,&#8221; the Fed <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20220727a.htm">said</a> in a press release. &#8220;In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.&#8221;
The Fed also noted that &#8220;recent indicators of spending and production have softened&#8221; but added, &#8220;job gains have been robust in recent months, and the unemployment rate has remained low.&#8221;
It also claimed that Russia&#8217;s war in Ukraine is partly to blame for the ongoing economic woes.
&#8220;Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,&#8221; the group noted. &#8220;Russia&#8217;s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.&#8221;
While the Fed may say that Russia&#8217;s war is to blame, Federal Reserve Chairman Jerome Powell has previously <a href="https://www.dailywire.com/news/fed-chairman-we-now-understand-better-how-little-we-understand-about-inflation">testified</a> that &#8220;inflation was high before, certainly before the war in Ukraine broke out&#8221; and that the violence wasn&#8217;t the main driver of inflation.
The move comes as the Consumer Price Index (CPI) <a href="https://www.dailywire.com/news/inflation-soars-to-new-high-of-9-1">reported</a> in July that inflation increased 9.1% between June 2021 and June 2022.
In June, the Fed also <a href="https://www.dailywire.com/news/federal-reserve-takes-most-aggressive-action-to-fight-inflation-in-three-decades">hiked</a> interest rates by 0.75% — which was then the boldest action since 1994 — after inflation rose 8.6% in May.
The central bank had already increased rates by 0.5% in May — the largest increase since 2000 — after a 0.25% rate hike from near-zero levels in March.
Powell has previously <a href="https://www.dailywire.com/news/fed-chairman-we-now-understand-better-how-little-we-understand-about-inflation">said</a> that his team had failed to see inflation coming because they were using outdated models to forecast the economy.
During the European Central Bank forum, host Francine Laqua asked panelists, “Hindsight is a beautiful thing, I know…but going forward…how do we need to look at inflation differently? So, for example, in the U.S. — the stimulus. Did we circulate the impact this would have on inflation?”
“I think we now understand better how little we understand about inflation,” Powell responded.
The Bloomberg TV anchor responded with a chuckle, “That’s not very reassuring.”
“No, honestly, this was unpredicted. I was looking at the time of our June meeting one year ago, of the 35 people who filed with a survey of professional forecasters, 34 of them had inflation below four percent for the last year. And of course, it was way above four percent.”
“So really, everyone had the same model — which was the <a href="https://www.investopedia.com/terms/p/phillipscurve.asp">Phillips curve</a> model — and it just was not capable of producing high inflation,&#8221; he added. &#8220;But what it was missing was something that’s been completely missing in the data for 40 years, which is basically the collapse of the supply-side.”
A portion of the exchange can be seen here:
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">
Jerome Powell: &quot;I think we now understand better how little we understand about inflation.&quot;
Host: &quot;That&#39;s not very reassuring&quot;
Jerome : &quot;This was unpredicted&quot;
Only the &quot;experts&quot; and the media didn&#39;t see this coming. Just about everyone else did.
Sound ON <a href="https://t.co/6Gv35rXPrW">pic.twitter.com/6Gv35rXPrW</a>
&mdash; Wall Street Silver (@WallStreetSilv) <a href="https://twitter.com/WallStreetSilv/status/1542214066218774528?ref_src=twsrc%5Etfw">June 29, 2022</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Stock photo

Federal Reserve Hikes Interest Rates Again To Combat Bidenflation

Federal Reserve Hikes Interest Rates Again To Combat Inflation

Federal Reserve

Inflation

Interest Rates

Average rent in the <a href="http://dailywire.com/topic/new-york-city">New York City</a> borough of Manhattan surpassed $5,000 in the month of June, according to a recent <a href="https://millersamuel.com/files/2022/07/Rental-06_2022.pdf">report</a> from <a href="https://www.dailywire.com/topic/real-estate">real estate</a> appraisal firm Miller Samuel.
As vacancy rates remained under 2%, average rent in Manhattan reached $5,058 — a 1.7% surge since May and a 29% increase year-over-year — while the average rental price per square foot hit $82.18.
“The rental market continued to show robust conditions, with prices rising to new records as the market share of landlord concession continued to fall,” the report said.
The median rental price of a Manhattan studio apartment has increased 16.7% year-over-year to $2,900, and the median price of a one-bedroom rose 21.2% to $4,000 over the same period. Manhattan’s average weekly wage of $3,967 as of early 2021 was the highest in the country and more than triple the national average of $1,289, according to the U.S. <a href="https://www.bls.gov/regions/new-york-new-jersey/news-release/countyemploymentandwages_newyorkcity.htm">Bureau of Labor Statistics</a>.
Miller Samuel CEO and Columbia University professor Jonathan Miller told The Daily Wire that “inbound demand” is a key driver of the soaring rental prices.
“Office towers are 60% empty, yet rents are going to new highs. Remote has disrupted the tether between work and home,” he explained. “People are going to urban markets for reasons beyond work, countering the false narrative of ‘cities are dead’ that was the story during the early days of the pandemic.”
Manhattan is the economic center of New York City and home to Wall Street, the United Nations headquarters, and other important institutions. In Brooklyn — where weekly wages average $1,014 — average rental prices have increased 20% year-over-year to $3,822.
Beyond New York City, home sales are falling as the median national home sale price <a href="https://www.nar.realtor/newsroom/existing-home-sales-fell-3-4-in-may-median-sales-price-surpasses-400000-for-the-first-time">surpasses</a> $400,000 for the first time. The 30-year fixed rate mortgage began <a href="https://www.dailywire.com/news/pending-home-sales-unexpectedly-surge-even-as-mortgage-rates-near-6">climbing</a> at the beginning of 2022, according to data from government-backed mortgage company <a href="https://fred.stlouisfed.org/series/MORTGAGE30US">Freddie Mac</a>. Beginning at slightly over 3% in January, mortgage rates neared 6% in June and moderated to roughly 5.5% as of Thursday.
“The spike in mortgage rates has increased rents because the rental market was already tight from a strong economy, and conservative mortgage underwriting is pushing would-be buyers into the rental market more quickly,” Miller added. “Peak rental season doesn&#8217;t hit until the end of the summer, so there are likely more increases ahead.”
The rise in mortgage rates occurs as the Federal Reserve tapers its aggressive monetary stimulus. In response to COVID and the lockdown-induced recession, the central bank ramped up its purchase of <a href="https://www.dailywire.com/news/watch-powell-admits-that-fed-policies-are-behind-high-home-prices">mortgage-backed securities</a>, leading to a decline in mortgage costs.
In addition to jettisoning the securities from the Fed’s balance sheet, policymakers are <a href="https://www.dailywire.com/news/federal-reserve-takes-most-aggressive-action-to-fight-inflation-in-three-decades">hiking interest rates</a> — most recently, by a 0.75% increment in June that represented the boldest action to combat inflation in nearly three decades. After news that the Consumer Price Index (CPI) <a href="https://www.dailywire.com/news/inflation-soars-to-new-high-of-9-1">rose</a> 9.1% between June 2021 and June 2022, two members of the Federal Open Market Committee — which determines the central bank’s policy decisions — <a href="https://www.dailywire.com/news/federal-reserve-officials-nod-toward-massive-interest-rate-hike-after-bad-inflation-news">indicated</a> that they would be open to another round of large rate hikes.
“If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down,” Federal Reserve Board Governor Christopher Waller said on Thursday. Meanwhile, Federal Reserve Bank of St. Louis President James Bullard told reporters that “it would make a lot of sense” to choose a 0.75% rate hike such that rates increase to around 3.5% by the end of this year.

New York City

Average Manhattan Rent Surges Past $5,000 Per Month

Manhattan Sees Average Monthly Rent Surpass $5,000 Per Month

Economy

Housing

<a href="http://dailywire.com/topic/federal-reserve">Federal Reserve</a> Governor Christopher Waller said on Thursday that he would support an <a href="https://www.dailywire.com/topic/interest-rates">interest rate</a> hike of 0.75% or higher in reaction to high <a href="http://dailywire.com/topic/inflation">inflation</a>.
The remarks came after two reports released this week by the U.S. Bureau of Labor Statistics showed that the Consumer Price Index (CPI) <a href="https://www.dailywire.com/news/inflation-soars-to-new-high-of-9-1">rose</a> 9.1% between June 2021 and June 2022, while the Producer Price Index (PPI) <a href="https://www.dailywire.com/news/producer-price-index-hits-11-3-in-another-dismal-inflation-reading">rose</a> 11.3% during the same period.
In a <a href="https://www.federalreserve.gov/newsevents/speech/waller20220714a.htm">speech</a> at the Rocky Mountain Economic Summit in Idaho, Waller indicated that he supports another 0.75% rate hike, matching an <a href="https://www.dailywire.com/news/federal-reserve-takes-most-aggressive-action-to-fight-inflation-in-three-decades">identical increase</a> in June that marked the largest increment since 1994. He could also support a larger rate hike if other data show strong economic activity.
“We have important data releases on retail sales and housing coming in before the July meeting,” Waller said. “If that data comes in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down.”
Rate hikes are meant to discourage inflation, but they carry the side effect of increasing borrowing costs and thereby dampening economic activity. Yet Waller noted that the labor market is currently “very strong” with an unemployment rate “below the median of policymakers&#8217; expected longer-run level” — a reality that allows the Fed to increase rates while likely avoiding severe economic consequences.
Waller said he will be “looking for signs” that inflation is moving toward policymakers’ 2% long-term target “on a sustained basis.” He also expressed concern that American consumers and businesses will come to anticipate higher inflation in the long run — an expectation that hinges upon “whether they believe the Fed is sufficiently committed to its inflation target.”
Indeed, the Federal Reserve Bank of New York’s most recent <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20220711">Survey of Consumer Expectations</a> revealed that Americans <a href="https://www.dailywire.com/news/americans-inflation-forecasts-hit-another-record-high">foresee</a> one-year-ahead inflation hitting 6.8% — an increase from 6.6% in May and the highest level since the survey began in 2013. However, inflation expectations for the next three years fell from 3.9% to 3.6%, while five-year-ahead forecasts declined from 2.9% to 2.8%.
Other key officials are nodding to another significant rate hike. Federal Reserve Bank of St. Louis President James Bullard — who serves alongside Waller as one of the 12 members of the Federal Open Market Committee — <a href="https://www.wsj.com/articles/feds-christopher-waller-supports-another-0-75-point-rate-rise-in-july-11657216604">said</a> to reporters that “it would make a lot of sense” to choose a 0.75% rate hike such that rates increase to around 3.5% by the end of this year.
Also on Thursday, Treasury Secretary and former Federal Reserve Chair Janet Yellen <a href="https://www.dailywire.com/news/janet-yellen-addresses-unacceptably-high-inflation-tells-what-biden-administration-will-do-next">affirmed</a> that she would endorse any actions taken by monetary policymakers to quell rising prices. “We’re first and foremost supportive of the Fed’s efforts; what they deem to be necessary to get inflation under control,” she remarked.
Meanwhile, President Joe Biden <a href="https://www.dailywire.com/news/biden-dismisses-record-high-inflation-news-as-out-of-date">asserted</a> on Wednesday that the most recent inflation news is “unacceptably high,” yet outdated. “Energy alone comprised nearly half of the monthly increase in inflation. Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices,” he said in a <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/13/president-biden-statement-on-cpi-inflation-in-june/">statement</a>, noting that gas prices have fallen by $0.40 since June. “Those savings are providing important breathing room for American families.”

Federal Reserve Lowers Key Rate By Three Quarters Of A Point

Federal Reserve Officials Nod Toward Massive Interest Rate Hike After Bad Inflation News

Two Key Federal Reserve Officials Open To Large Rate Hikes

The World Bank is warning that the global economy is about to experience a prolonged period of stagflation due to continual shocks to global infrastructure.
In its flagship report, &#8220;<a href="https://openknowledge.worldbank.org/handle/10986/37224">Global Economic Prospects</a>,&#8221; for the month of June, the international financial conglomerate warned that global inflation is continuing to climb to multi-decade highs, which it blamed on supply chain shocks, elevated demand from opening up economies post-COVID, and the Russian invasion of Ukraine. The <a href="https://www.dailywire.com/news/sharpest-slowdown-in-80-years-world-bank-releases-ominous-news-about-recession-risk">World Bank</a> notes that monetary policies needed to control inflation, including hiking national interest rates, would likely trigger a global recession, which in turn would cause a period of stagflation — economic stagnation combined with soaring inflation — not seen since the 1970s.
&#8220;The global economy is in the midst of a sharp growth slowdown following the extraordinarily strong rebound last year,&#8221; the World Bank said in its report. &#8220;This slowdown coincides with a steep runup in global inflation to multi-decade highs. Looking ahead, growth over the next decade is expected to be considerably weaker than over the past two decades.
Although global inflation is for now projected to return close to its 2019 average by 2024, there is a growing risk that it may remain elevated as global supply disruptions persist and some structural drivers that depressed inflation over the past three decades dissipate. These developments raise concerns about stagflation — a period of both weak growth and elevated inflation similar to what happened during the 1970s. The experience of the 1970s is a reminder of the damage this could cause to the global economy and, especially, to emerging market and developing economies (EMDEs).&#8221;
According to the report, global markets expected inflation to peak sometime around the middle of this year, before declining to about 3% by mid-2023. Those numbers would still be above the global pre-pandemic average, but slowing global growth, tightening monetary policies, the withdrawal of government assistance, prices leveling off, and easing supply bottlenecks would allow inflation to slow down. And, the report notes, most market commentators believe that global monetary policymakers have the tools to bring inflation under control.
&#8220;However, if inflation expectations deanchor, as they did in the 1970s, as a result of persistently elevated inflation and repeated inflationary shocks, the interest rate increases required to bring inflation back to target will be greater than those currently anticipated by financial markets,&#8221; the report said. &#8220;This raises the specter of the steep increases in interest rates that brought inflation under control but also triggered a global recession in 1982. That global recession also coincided with a string of financial crises and marked the beginning of a protracted period of weak growth in many EMDEs.&#8221;
JPMorgan Chase CEO <a href="https://www.dailywire.com/news/top-banker-brace-yourself-for-looming-economic-hurricane">Jamie Dimon</a> echoed similar concerns, warning investors at a financial conference in New York last week that his firm is bracing for an economic &#8220;hurricane,&#8221; adding that while the current consensus is that monetary policy can control inflation, investors must brace for rough times ahead. “You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” Dimon said of current economic trends. “Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” he added. &#8220;That hurricane is right out there, down the road, coming our way.”

World Bank HQ

World Bank Warns Of Potential Stagflation Not Seen Since The 1970s

Recession

President Joe Biden is meeting with Federal Reserve Chair Jerome Powell on Tuesday as inflation continues to pressure American households.
The Fed <a href="https://www.dailywire.com/news/the-fed-jacks-key-rate-up-half-point-as-inflation-surges">hiked interest rates</a> by 0.5% earlier this month — the largest rate increase since May 2000 — in an attempt to curb rising price levels. The move followed a 0.25% rate hike from near-zero levels two months ago. In April, year-over-year consumer price inflation was 8.3% — a level that has not been seen in 40 years.
Biden is meeting with Powell “to show that he is serious about inflation,” American Enterprise Institute senior fellow Desmond Lachman told The Daily Wire. The two officials were also <a href="https://www.wsj.com/articles/biden-powell-to-meet-with-inflation-at-its-highest-in-40-years-11654018722">joined</a> by Treasury Secretary Janet Yellen, who served as Fed chair before Powell began his first term in 2018.
“He’s wanting to show that he’s fully supportive of the Fed’s move to hike interest rates to deal with inflation,” Lachman, a former International Monetary Fund official, added. “From Powell’s point of view, this is a good meeting.”
Hiking interest rates slow economic activity by increasing the cost of borrowing capital. Past presidents — including Richard Nixon, Ronald Reagan, and George H.W. Bush — have therefore called for central bankers to avoid rate increases, according to <a href="https://www.axios.com/2022/05/30/biden-powell-meeting">Axios</a>. Most recently, Donald Trump pushed Powell to slash rates as the economy began to freefall amid the spread of COVID-19. Biden’s approach marks a departure from his predecessors as high prices weigh on American consumers ahead of the midterm elections.
“It’s obvious that Biden realizes inflation is the key political problem,” Lachman added, noting that no policy changes will emerge from the Tuesday meeting. “He’s making sure that nobody blames him for having produced the inflation.”
Indeed, Biden acknowledged rising price levels in a Monday opinion piece for <a href="https://www.wsj.com/articles/my-plan-for-fighting-inflation-joe-biden-gas-prices-economy-unemployment-jobs-covid-11653940654?mod=hp_opin_pos_2#cxrecs_s">The Wall Street Journal</a>. The commander-in-chief expressed his refusal to “meddle with the Fed,” but vowed to make tackling high prices his “top economic priority” while arguing that the central bank still “has a primary responsibility to control inflation.”
“Americans are anxious. I know that feeling. I grew up in a family where it mattered when the price of gas or groceries rose,” Biden wrote. “We felt it around the kitchen table. But the American people should have confidence that our economy faces these challenges from a position of strength.”
There are signs that inflation is <a href="https://www.dailywire.com/news/summer-canceled-inflation-kills-vacations-summer-camp-for-kids-poll-finds">giving consumers pause</a> from summer spending plans.
A recent poll from Echelon Insights found that 75% of parents are “extremely” or “very” concerned about the “rising cost of everyday purchases like food or gas.” When asked if their families have “changed or canceled plans for a family trip” because of inflation, 51% answered positively — and 41% said they “changed or canceled activities for my children like camp or extracurricular activities.”
Another survey <a href="https://www.dailywire.com/news/two-summers-ago-americans-feared-covid-would-ruin-their-vacations-now-they-fear-the-economy">conducted</a> by Morning Consult on behalf of the American Hotel &amp; Lodging Association showed that 57% of Americans are “likely to take a family vacation this summer.” However, 90% of Americans have considered “gas prices” or “inflation” when deciding to travel. In contrast, 78% listed “COVID-19 rates.”
Monday marked the <a href="https://www.dailywire.com/news/heres-how-much-gas-prices-have-risen-since-last-memorial-day">highest Memorial Day gas prices</a> in more than a decade, according to data from AAA and the U.S. Energy Information Administration. Prices at the pump hit $4.62 per gallon on Memorial Day 2022 — 53% higher than the $3.03 per gallon on Memorial Day 2021 and 136% higher than the $1.96 per gallon on Memorial Day 2020.

President Biden Meets With Federal Reserve Chair Jerome Powell At White House

‘Inflation Is The Key Political Problem’: Biden, Powell Meet To Discuss Taming High Prices

Fed Chair Jerome Powell Meets With Biden To Discuss Battling Inflation

Janet Yellen

Joe Biden

The housing boom witnessed over the past two years may finally be drawing to a close, as indicated by mortgage and sales data.
Since the beginning of 2022, 30-year fixed mortgage rates have <a href="https://fred.stlouisfed.org/series/MORTGAGE30US">surged</a> from slightly over 3% to well above 5% — causing a <a href="https://www.cnbc.com/2022/05/25/mortgage-demand-slides-further-even-as-interest-rates-pull-back-slightly.html">slump in demand</a> for new purchase loans and refinancing services. A Tuesday report from the U.S. Census Bureau <a href="https://www.census.gov/construction/nrs/pdf/newressales.pdf">confirmed</a> that sales of new single-family homes in April fell to 591,000 — falling far short of the 750,000 <a href="https://www.cnbc.com/2022/05/24/sales-of-newly-built-homes-fall-16percent-in-april-as-prices-soar.html">expected</a> by analysts, as well as 16.6% below home sales in March.
Although sale activity has slumped to its lowest level since the onset of COVID-19 and the lockdown-induced recession, the median sale price in April was $450,600 — nearly 20% above prices at the same time last year.
David Bahnsen, the founder of Manhattan-based wealth management firm The Bahnsen Group, told The Daily Wire that there is “no ambiguity” around the reason for the drop in home sales.
“It is affordability,” Bahnsen explained. “Rising rates on top of bubble-level prices have made housing less affordable, and now that has caught up with transaction activity.”
Indeed, the residential real estate market is becoming less friendly to households amid both phenomena. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” government-backed mortgage company <a href="https://www.freddiemac.com/pmms">Freddie Mac</a> said last month.
Bahnsen observed that higher rates and soaring prices have reached an “affordability turning point.”
“My expectation remains that it will not become evident in prices just yet — as rather than transact at lower prices sellers simply don’t sell for a time — but then later in the year, we begin to see price levels decline as well, with those declines accelerating in 2023,” Bahnsen forecasted.
The sharp increase in mortgage rates is largely due to actions from the Federal Reserve to taper its quantitative easing regime. In a preliminary effort to curb inflation, the Fed <a href="https://www.dailywire.com/news/the-fed-jacks-key-rate-up-half-point-as-inflation-surges">increased interest rates</a> by a half point earlier this month — which marked the largest rate hike since May 2000 and followed a quarter point increase from the near-zero levels that have prevailed since early 2020.
Heritage Foundation research fellow Joel Griffith told The Daily Wire that moving forward, buyers can expect a wider selection of homes and increased buying power — even as mortgage payments remain high.
“A $1,600 mortgage payment could finance a $400,000 purchase one year ago — but only a $300,000 purchase today,” Griffith commented. “Sellers can anticipate buyers far more eager to haggle lower on price and longer sales time. And many sellers may be unpleasantly surprised to see their mortgage payments on their next home substantially higher — even if their mortgage balance is smaller.”
More broadly, there are mismatches between supply and demand that continue to plague the housing market. Construction of new long-term housing has <a href="https://www.housingwire.com/articles/us-housing-market-is-short-5-5-million-homes-nar-says/">already been slowing</a> over the past several decades — resulting in 6 million too few homes on the market.
As The Daily Wire’s Cabot Phillips explained on a recent episode of “<a href="https://www.dailywire.com/podcasts/morning-wire">Morning Wire</a>,” some experts believe that “until the supply of houses meets the overwhelming demand that we’re seeing right now, prices will continue to rise.”

Brother and sister sitting on front step at home on sunny day

The Housing Market Reaches An ‘Affordability Turning Point’

‘Bubble-Level Prices’ In The Housing Market Finally Take Their Toll On Home Sales

Americans continue to be deeply worried about inflation and expect higher price levels in the long run, according to a survey from the Federal Reserve Bank of New York released Monday.
The April 2022 <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20220509">Survey of Consumer Expectations</a> revealed that inflation expectations at the one-year horizon fell from 6.6% to 6.3% in March, even as three-year horizon expectations rose from 3.7% to 3.9%. Both data series remain near their highs.
Meanwhile, expectations for gas price increases over the next year fell from 9.6% to 5.2%. Americans expect 9.4% increases in food prices, 9.5% increases in medical care prices, 10.3% increases in rent prices, and 9.1% increases in the cost of college education.
The survey was released as the key University of Michigan’s Consumer Sentiment Index <a href="https://fred.stlouisfed.org/series/UMCSENT">continues to plummet</a>. According to University of Florida economist Hector Sandoval, inflation <a href="https://news.ufl.edu/2022/05/inflation-drives-april-consumer-sentiment-down/">plays a major role</a> in Americans households’ worries — thereby threatening to slow economic activity.
“Currently, spending intentions have been trending downward over the last few months as inflation has risen consistently, reaching record levels and prompting the Fed to increase interest rates in the short run,” Sandoval said in response to sentiment among Florida consumers dropping 4.4% in April.
Indeed, the Federal Reserve <a href="https://www.dailywire.com/news/the-fed-jacks-key-rate-up-half-point-as-inflation-surges">increased interest rates</a> by a half point last week to curb rising price levels — marking the largest rate hike since May 2000 and following a quarter point increase from near-zero levels two months ago.
“Inflation is much too high,” Fed Chairman Jerome Powell said at a news conference. “We understand the hardship it is causing, and we’re moving expeditiously to bring it back down. We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses.”
The rise in prices has outpaced nominal increases in pay, producing a nearly <a href="https://www.dailywire.com/news/real-wages-plummet-nearly-3-due-to-inflation">3% decline in real wages</a> — stretching Americans’ budgets with respect to food, gas, housing, and other necessities. A <a href="https://www.dailywire.com/news/94-percent-of-americans-concerned-about-inflation-overwhelmingly-trust-republicans-to-handle-it-poll">recent poll</a> found that 94% of Americans were either “upset” or “concerned” about the impact of skyrocketing inflation, while a slim 28% approved of President Joe Biden’s approach toward managing price levels.
Along with everyday consumers, experts predict that <a href="https://www.dailywire.com/news/experts-make-dire-warning-on-already-record-level-inflation">inflation will continue</a> to torment the United States economy.
“Inflation, as we all know, when it gets in the system, it’s very hard to get it out,” billionaire investor David Rubenstein said on Fox News. “It takes a long time to get it out, can take a couple of years.”
“So now I don’t think the inflation rate this year will be what it was last month or so. I don’t think we’re going to have 8% annualized rate of inflation, but I suspect something around 5% is probably not unlikely, maybe even 6%,” he added.
Milken Institute Chief Economist Bill Lee agreed, saying inflation would be “well over 3.5%” for the next five years.
“One of the things that we’ve seen is that inflation has, you know, very direct impacts on Americans, on American families and American businesses,” Director of the Congressional Budget Office Phillip Swagel told Fox News Digital. “It also has implications… for the budget. For American families, the high inflation that we’ve seen the highest in decades has meant higher prices for food, for travel, for gasoline. It means that family incomes don’t go as far. Family budgets are stretched.”

8C36A07C-5EC9-4000-9157-317D3523A106_1_201_a

Inflation Worries Remain Near Record Highs, Boding Poorly For Economy

Americans Remain Worried About Inflation As Economic Woes Continue

Polls

Nancy Lazar — the chief global economist of investment bank Piper Sandler — said on Monday that the world is in the first part of a “very significant” recession.
During an interview with <a href="https://www.foxbusiness.com/economy/world-in-early-stages-of-very-significant-recession-economist-nancy-lazar">Fox Business</a>, Lazar told anchor Maria Bartiromo that &#8220;It’s going to be a global recession pulling down [the] Euro zone in particular” and noted that “it looks like China GDP in the second quarter could also be negative.&#8221;
Lazar added that economic activity in the United States “will feel very, very weak” as growth slows down from last year’s recovery.
&#8220;Now we think the United States could not go into a recession. We have still plus 1% GDP for the U.S. this year, but that’s still a very significant slowdown from roughly 6% last year,&#8221; Lazar explained.
She added that similar fears of a recession occurred in 2015 and 2016.
&#8220;You didn’t get it, in part because the backbone of the United States is pretty healthy, which we still think is the case,&#8221; she told Bartiromo. &#8220;But, nonetheless, outside of the United States, indeed you do get a recession, led by the Euro zone given what’s going on with oil prices and global interest rates.&#8221;
Indeed, economists have been eyeing the broader impacts of high energy prices and the tapering of aggressive monetary policy.
President Joe Biden’s tenure in the White House has been marked by surging gas prices, with costs at the pump further accelerating due to the Russian invasion of Ukraine. As of Monday morning, the average price of regular gas is $4.12, according to <a href="https://gasprices.aaa.com/">AAA</a>. 
“Over the past 15 months, we’ve seen inflation grow higher than any time in the last 40 years. Perhaps the most painful driver of inflation has been the skyrocketing cost of gasoline at the pump,” Sen. Ted Cruz (R-TX) recently <a href="https://www.dailywire.com/news/this-is-not-putin-this-is-joe-biden-senator-ted-cruz-blasts-biden-admin-over-spiking-gas-prices">told</a> the Senate Committee on Commerce, Science, and Transportation. 
Meanwhile, the Federal Reserve recently made its first move to raise interest rates, thereby increasing the cost of borrowing money and making loans more expensive. Earlier this month, The 30-year mortgage rate <a href="https://www.dailywire.com/news/mortgage-rates-hit-highest-level-in-over-a-decade">surpassed</a> 5%, rendering homeownership more expensive for American families.
“As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” government-backed mortgage company <a href="https://www.freddiemac.com/pmms">Freddie Mac</a> explained.
Lazar said that higher interest rates will help to curb breakneck inflation in the United States.
&#8220;I think we are going to have significant goods deflation,&#8221; she told Bartiromo, pointing to the price of used cars as an example. &#8220;We’ve seen used cars decline 6% just in a few months.”
The end of soaring price levels — despite relief offered to consumers — would be harmful to companies’ margins.
&#8220;On the one hand that’s positive in that you are going to send, obviously, the CPI significantly lower over the next year,” Lazar said, “but on the other hand, it’s not going to be pretty in that it’s going to affect company earnings, through lower earnings via weaker demand for products and also declining prices.”

Grocery store

Economist Warns That World Is In Early Stages Of ‘Very Significant’ Recession

Fox Business Channel

Maria Bartiromo

The 30-year mortgage rate has reached 5%, rendering homeownership more expensive for American families.
According to government-backed mortgage company <a href="https://www.freddiemac.com/pmms">Freddie Mac</a>, 30-year fixed-rate mortgages <a href="https://www.dailywire.com/news/mortgage-rates-soaring-at-fastest-pace-in-nearly-30-years-making-homes-even-less-affordable">rose</a> 0.28% in a single week and nearly 2% since this time last year.
“As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” the company’s website explained. 
Realtor.com economist George Ratiu told <a href="https://www.wsj.com/articles/mortgage-rates-hit-5-for-first-time-since-2011-11649943332?mod=hp_lead_pos1">The Wall Street Journal</a> that, as of one year ago, purchasing the median American home at prevailing rates implied a monthly mortgage bill of about $1,223 after a 20% down payment. Today, the same purchase would imply a monthly payment of nearly $1,700—a 38% increase, he estimated.
“Most Americans who buy a home are in a sense making the biggest purchase of their lives,” Ratiu added, noting that the additional barrier to home ownership will harm American families.
Last week, CNBC real estate correspondent Diana Olick <a href="https://www.cnbc.com/2022/04/06/surging-interest-rates-push-mortgage-demand-down-more-than-40percent-from-a-year-ago.html">wrote</a> that total mortgage application volume is quickly plummeting — down 41% from one year ago. “Rising interest rates are crushing the mortgage market,” she explained, “as precious few homeowners can now benefit from a refinance and more potential homebuyers become priced out.”
“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” economist Joel Kan told CNBC. “As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019.”
As The Daily Wire’s Cabot Phillips explained on a recent episode of “<a href="https://www.dailywire.com/podcasts/morning-wire">Morning Wire</a>,” the Federal Reserve is now warning of a housing bubble. The central bank recently made its first move to raise interest rates, thereby increasing the cost of borrowing money and making loans more expensive.
When asked why housing costs are spiking, Phillips pointed to inflation — which is currently at an 8% year-to-year rate — rising costs for lumber and fuel and the continued fallout from COVID-19. 
“During the pandemic, new construction projects were halted across the board, and that means the number of houses now up for sale is far lower than usual. It’s simple supply and demand,” he explained. “And unfortunately on that front, it will likely take years for new home construction to once again meet demand.”
“Some real estate experts say that increasing mortgage rates should cool the market a bit,” Phillips commented. “Remember, mortgage rates were down around 2% during the pandemic, so a lot of people were simply able to afford houses that a few years earlier, when rates were higher, would’ve been out of their price range.”
Some experts believe that “until the supply of houses meets the overwhelming demand that we’re seeing right now, prices will continue to rise,” Phillips remarked.

Home For Sale

Mortgage Rates Hit Highest Level In Over A Decade

Biden Administration

COVID

Real estate

On Wednesday, for the first time since the Great Recession of 2008, the Federal Reserve lowered interest rates. As <a href="https://www.cnn.com/2019/07/31/business/fed-rate-cut-july-meeting/index.html">CNN reported</a>, “Policymakers led by Fed Chairman Jerome Powell voted 8-2 in favor of a small cut in the federal funds rate, and recommitted to their promise to &#8216;act as appropriate&#8217; to sustain the country&#8217;s <a href="http://www.cnn.com/2019/07/23/business/budget-deal-fed-rate-cuts/index.html">longest economic expansion in history</a>.”
Powell <a href="https://www.marketwatch.com/story/fed-decision-and-jerome-powell-press-conference---live-blog-and-video-2019-07-31">explained</a>, “The outlook for the U.S. economy remains favorable and this action is designed to support that outlook. It is intended to ensure against downside risks from weak global growth and trade policy uncertainty, to help offset the effects these factors are having on the economy, and to promote a faster return of inflation to our 2% objective.”
<a href="https://www.cnbc.com/2019/07/31/fed-cuts-rates-by-a-quarter-point.html">CNBC</a> reported, “In approving the cut, the FOMC cited ‘implications of global developments for the economic outlook as well as muted inflation pressures.’ The committee called the current state of growth &#8216;moderate&#8217; and the labor market ‘strong,’ but decided to loosen policy anyway.”
President Trump has been pushing for months for such a move; On Monday he tweeted that a small cut was not sufficient. He wrote:
<blockquote>The Fed “raised” way too early and way too much. Their quantitative tightening was another big mistake. While our Country is doing very well, the potential wealth creation that was missed, especially when measured against our debt, is staggering. We are competing with other countries that know how to play the game against the U.S. That’s actually why the E.U. was formed&#8230;.and for China, until now, the U.S. has been “easy pickens.” The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!</blockquote>
<div class="embed tweet">
<blockquote class="twitter-tweet">The Fed “raised” way too early and way too much. Their quantitative tightening was another big mistake. While our Country is doing very well, the potential wealth creation that was missed, especially when measured against our debt, is staggering. We are competing with other&#8230;..
— Donald J. Trump (@realDonaldTrump) <a href="https://twitter.com/realDonaldTrump/status/1155829888701673472?ref_src=twsrc%5Etfw">July 29, 2019</a></blockquote>
</div>
<div class="embed tweet">
<blockquote class="twitter-tweet">&#8230;.countries that know how to play the game against the U.S. That’s actually why the E.U. was formed&#8230;.and for China, until now, the U.S. has been “easy pickens.” The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!
— Donald J. Trump (@realDonaldTrump) <a href="https://twitter.com/realDonaldTrump/status/1155829890903617536?ref_src=twsrc%5Etfw">July 29, 2019</a></blockquote>
</div>
Asked about the Fed’s move on Wednesday, Trump replied that lowering rates so they rest between 2% and 2.25% didn’t go far enough. He stated:
<blockquote>The Fed move, in my opinion, far too early and far too severely; it puts me somewhat at a disadvantage. Fortunately I’ve made the economy so strong that nothing’s going to stop us. But the Fed could have made it a lot easier; I would like to see a large cut and I’d like to see immediately the quantitative tightening stop. It should be stopped. For them to do quantitative tightening and also higher interest rates simultaneously, I think was a big mistake. I also think that had they not done it, as good as we’ve done, we’ve hit a record, as you will tell, as you will say, in the stock market. We had an all-time high in the history of the stock market; I think I would have been 10,000 points higher and I think we would have been in the 4’s with GDP.</blockquote>
Mark Haefele, global chief investment officer at UBS Wealth Management, told CNBC, “There’s a range of things that they’re looking at. Really, the low inflation allows the Fed some latitude to take preemptive steps and hopefully avoid moving in the future to something like negative rates. Because they did only 25 basis points, they avoided doing what some would have felt was more shock and awe with 50 basis points. So they can move towards language like ‘data dependent’ now that they’ve shown they are prepared to be flexible.”

ANOTHER TRUMP WIN: Fed Cuts Interest Rates

Donald Trump

On Thursday, in her first public remarks since Donald Trump won the presidency, Federal Reserve chairwoman Janet L. Yellen announced that the Fed would likely raise its benchmark interest rate in December.
<a href="http://www.nytimes.com/2016/11/18/business/yellen-federal-reserve-congress.html?smid=tw-share&amp;amp;_r=5">The New York Times</a> reported that Yellen insisted the economy was healthy in <a href="https://www.federalreserve.gov/newsevents/testimony/yellen20161117a.htm">prepared testimony</a> for Congress&#8217;s Joint Economic Committee, saying, &#8220;U.S. economic growth appears to have picked up from its subdued pace earlier this year.&#8221; Yet she also tempered that assessment, adding, &#8220;While above-trend growth of the labor force and employment cannot continue indefinitely, there nonetheless appears to be scope for some further improvement in the labor market.&#8221;
<a href="http://www.bloomberg.com/news/articles/2016-11-17/yellen-says-fed-interest-rate-hike-could-come-relatively-soon">Bloomberg</a> reported that Yellen said of the hike that it &#8220;could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the committee&#8217;s objectives,&#8221;
Explaining why the Fed had not already raised rates, Yellen posited that the reluctance to do so did not derive from lack of confidence in the economy, but rather the benefit of low borrowing costs, which stimulate economic growth by eliciting borrowing and risk-taking. <a href="http://www.wsj.com/articles/feds-yellen-rate-increase-could-become-appropriate-relatively-soon-1479387604">The Wall Street Journal</a> took a rosy view of the economy, too, stating of the Fed&#8217;s prospective decision, &#8220;They now have several new pieces of reassuring data: <a href="http://www.wsj.com/articles/u-s-adds-161-000-jobs-in-october-jobless-rate-ticks-down-to-4-9-1478262813">wages grew 2.8% in October</a>, the fastest annual pace since June 2009, and employers continued to add jobs at a steady clip, the Labor Department said earlier this month.&#8221;
Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., warned, &#8220;Yellen&#8217;s testimony ignored the very real possibility of substantial fiscal stimulus next year &#8230; (Yellen) &#8220;does not want the Fed to become even more of a political punch bag than it is already.&#8221;
But Yellen gave her own worries about waiting too long:
<blockquote>
Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the committee&#8217;s longer-run policy goals. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.&#8221;
</blockquote>
Yellen stated that low interest rates were encouraging speculation, asserting, &#8220;Holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.&#8221;
Jonathan Wright, a former Fed economist, stated, &#8220;A rate hike in December is a done deal, barring a significant surprise in the next jobs numbers or in financial markets. But the pace of firming is likely to continue to be glacial because the funds rate will then be within about a percentage point of the FOMC&#8217;s estimate of neutral.&#8221;
The target range for the benchmark federal funds rate at 0.25% to 0.5% since December 2015.

Fed Will Raise Benchmark Interest Rate Just In Time For Trump To Take Office

According to <a href="http://www.wsj.com/articles/divided-federal-reserve-is-inclined-to-stand-pat-1473720501">The Wall Street Journal</a>, the rumors that the Federal Reserve would soon raise short-term interest rates are just that&#8212;rumors.
Just mentioning an interest-rate hike roils markets; the ripple effect of changing interest rates affects stock valuations, home buying and corporate investment, so the Fed is proceeding cautiously. Last Friday, stocks plunged as the markets thought a hike was imminent. But on Monday, when the hike seemed less certain, the Dow Jones Industrial Average rose 239.62 points to 18325.07.
There are disparate opinions as to whether the Fed should raise rates; J.P. Morgan Chase &amp; Co. Chairman and CEO James Dimon opined, &#8220;Let&#8217;s just raise rates &#8230; You don&#8217;t want to be behind the eight ball on this one, and I think it&#8217;s time to raise rates,&#8221; arguing that a quarter-percentage-point increase would be a &#8220;drop in the bucket.&#8221;
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, differed, stating, &#8220;I don&#8217;t feel that we are incurring the costs of patience.&#8221; He was echoed by Fed governor Lael Brainard, who <a href="http://www.wsj.com/articles/feds-lael-brainard-case-to-tighten-policy-preemptively-is-less-compelling-1473701143">called for &#8220;prudence&#8221;</a> in raising rates in Chicago on Monday, saying the Fed&#8217;s caution &#8220;has served us well.&#8221; Robert Kaplan, president of the Federal Reserve Bank of Dallas, added, &#8220;I would like to find a way for us to remove some amount of accommodation, but you can&#8217;t force it. You have to remind yourself it makes sense to be patient, because I don&#8217;t think the economy is overheating.&#8221;
The central bank will hold a Sept. 20-21 policy meeting with 16 officials before a decision is made. Because the jobless rate has dropped to 4.9%, some bankers want to raise rates, but others warn that the inflation rate has not dropped and the economy has grown so slowly that a hike in interest rates would pose a threat.
The Fed&#8217;s benchmark interest rate has only wavered between 0.25% and 0.5% since December. The Journal reports, &#8220;Officials began the year thinking they would nudge it up in four quarter-percentage-point increments this year, but have routinely deferred action amid uncertainty about a range of issues&#8212;including market volatility early in the year, soft jobs data in the spring and worries about the U.K.&#8217;s June vote to exit from the European Union.&#8221;

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