Fed Signals Possible End of Tightening Cycle

Dr. Robert Dietz, NAHB Chief Economist

NAHB Chief Economist Robert Dietz wrote the following in the most recent Eye on the Economy newsletter.

The Federal Reserve’s monetary policy committee raised the federal funds target rate by 25 basis points at the conclusion of its May meeting. Although the communication from the Fed did not explicitly indicate that it is done tightening, language used in its statement signals the Fed is moving toward a more data-dependent posture, albeit one that retains a hawkish bias.

Caution would suggest the Fed pause and evaluate conditions in the coming months. Keep in mind that approximately 40% of overall inflation is generated from shelter inflation, which can only be tamed by increasing the supply of more affordable, attainable housing.

The pivot in posture by the Fed is the right call given the recent banking system weakness. Although there is no systemic threat to the financial system, the Fed’s rapid... READ MORE