Stocks are flattish this morning as we await Kevin Warsh’s speech at Jackson Hole. Bonds and MBS are down.
Kevin Warsh is expected to speak today at Jackson Hole at 10:00 am EST. Given the Fed’s new direction of less communication it is hard to predict what he will say. Obviously the market is looking for direction regarding the level of interest rates but Warsh is probably going to play things close to the vest and speak in generalities: inflation is too high but we think it is going to come back down, we are prepared to raise rates if necessary, the overall economy is strong, the labor market is robust and monetary policy is in a good place while we wait and see how things unfold. No, I am not going to talk about Treasury’s repurchase program and long term bond yields which are set by the market.
Boston Fed President Susan Collins said that she is open to hiking rates if inflation doesn’t move lower: “I am open to supporting an increase if I see conditions as not providing that evidence of continued disinflation that I’m looking for,” Boston Fed President Susan Collins said in an interview on the sidelines of the Kansas City Fed’s annual symposium in Wyoming.
She was also asked about Treasury’s buyback program and declined to comment.
Separately, Cleveland Fed President Beth Hammack said now is the time to act on inflation: “I don’t want to prejudge anything. But I believe now is the time to act,” she said in a live CNBC interview from the Fed’s annual symposium in Jackson Hole, Wyoming. “I believe that we’ve been in an inflationary situation for more than five years. It’s been running well above our target. I don’t see any restriction in policy when I look at financial conditions and when I talk to market participants.”
“The longer inflation stays above our objective, the harder it will be for us to bring it back down, and the more pain that individuals and businesses are going to be experiencing,” she said. “To me, the real problem with us missing on our inflation objective for so long is the risk that an inflationary mindset starts to set in with the public.”
The “I don’t see any restriction in policy” means she thinks policy is neutral, and the natural non-inflationary rate of interest (r-star) is more or less in the mid-to-high 3% range, not 3% which is sort of where the consensus is.
The national median apartment rent rose 0.1% in August, however it is still down 0.8% on a year-over-year basis. The national median rent is $1,390 per month and has experienced annual declines for the past 3 years:
Given that home prices are rising modestly and apartment rental growth is negative shelter should be a drag on inflation, not a support for it. Something seems odd in the way the government is calculating owner equivalent rent.
The multifamily vacancy rate ticked down to 7.1% and list-to-lease times are 32 days. San Francisco and San Jose are seeing big increases in rents (think AI boom) while the Sun Belt is seeing declines.
New listings hit a 4-month high, according to Redfin, giving buyers more negotiating power. “Buyers have an opportunity to get a deal done before the market potentially picks back up after Labor Day,” said Chen Zhao, Redfin’s head of economics research. “House hunters should consider homes that have been listed for several weeks; sellers of those homes may be willing to accept an offer under asking price, provide concessions like a mortgage-rate buydown or make repairs based on an inspection. Sellers should resist the urge to price based on what a neighbor got a year or two ago: Pricing a home correctly from the start can be the difference between attracting a serious buyer and lingering on the market.”
