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Markets, Wall Street: Fed Is Probably Done
It's up to the data to "speak" now, and speak it would on Thursday and Friday. But the initial reaction to the July FOMC meeting and Jerome Powell's press conference was indicative of a market ready and willing to trade the end of the Fed's hiking cycle.
Most notably, the dollar was on the back foot, although it would subsequently reverse course. Prior to the ECB decision and a raft of top-tier data from the US, the greenback was lower for a third session.
As discussed in these pages on too ma
None of the commentary seems interested in talking about shelter inflation outside of rents. I guess if you’re hoping for an end to tightening and a path towards easing the best way to make that case would be to ignore the highest inflated asset consumers have to contend with. “See, inflation is down, groceries are down, autos are down, and you can remain a renter for the rest of your life!”
House price inflation went from very high to nil, and is now turning positive again. If OER follows with a long lag, then the OER component of shelter inflation may decline for the next year. Perhaps to turn up again in mid/late 2024.
Of course, neither OER nor house price expresses the actual cost of buying a house – that is a combination of price and rate, and will remain very high. Rate of increase probably depends more on 10 yr yield than on price.
I’m not sure how you quantify housing price inflation as having gone to nil. Housing inflation did begin to recede and is now spiking again, but I wouldn’t consider that brief and small recession “nil inflation”. When the median income is $35,947 and the median new home is selling for $427,327 that is just not realistic, especially given 7% mortgage rates. To put that into context vis a vis inflation, the median new home was $165,571 in the year 2000 and the median income was $31,915. To add fuel to the “poor people shouldn’t own homes” argument, back in 2000 it was a lot more reasonable for them to be able to do that than it is now and that’s why I think ignoring shelter inflation sans rents is ignoring the elephant in the room.
I don’t have exact numbers at hand, but I think as measured by Case-Schiller etc house price YOY growth went to flat, i.e. house price inflation YOY went to nil.
I agree that house price is very high, relative to income and rates, but holding the same very high price for a year is zero inflation.
I just checked and the 2022 median per capita personal income printed ~$65,500, still not enough for a media house.