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Risks of Fed waiting too long to cut rates, plus economist says housing market at 'rock bottom'

Yahoo Finance2024-02-27
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💫 Short Summary

The Federal Reserve is expected to loosen monetary policy with a rate cut in May, aiming for full employment and hitting the 2% inflation target. Global inflation is down, leading to central banks considering rate cuts. The housing market is improving with lower mortgage rates boosting sales, but existing home sellers may need to lower prices. Overall, caution is advised in monetary policy decisions to prevent economic stress and handle potential recession risks.

✨ Highlights
📊 Transcript
Expectations for Federal Reserve to loosen monetary policy in response to sticky inflation, strong jobs data, and cautious commentary.
Traders anticipate a rate cut in May, with uncertainty based on upcoming economic data.
Economist Mark Zandy advocates for earlier rate cuts to prevent economic stress, as economy has reached full employment and is near 2% inflation target.
Despite signs of resilience, Zandy argues for rate cuts to ensure economic stability.
Fed prioritizes certainty in hitting inflation target before making any policy changes.
Global inflation decreases due to pandemic effects on supply chains and energy markets, prompting central banks to contemplate rate cuts.
Housing market displays growth with existing home sales on the rise.
Possibility of rate cuts indicated by trend lines, although timing remains uncertain.
Economy deemed strong enough to withstand higher rates, but recession risk persists.
Rapid shifts in sentiment and prevailing high-rate environment emphasize the importance of cautious monetary policy decisions.
Positive Signs in the Housing Market.
Home sales and demand are expected to increase with lower mortgage rates, although the process may take time due to existing interest rate locks.
New home sales are strong, attributed to aggressive price cuts by home builders.
Existing home sellers may need to lower prices to stimulate more sales.
Median sale prices of existing homes have increased by 5%, indicating a positive trend in the market.