Trump Wants a 'Big Cut' From the Fed This Week

Investors are keenly awaiting the Federal Reserve's decision on interest rates, with the president advocating for a substantial cut. Markets, however, anticipate a more modest reduction, and the president may be disappointed. This week is packed with economic indicators, including Empire Manufacturing data showing a significant slowdown, retail sales, and import prices, all of which could influence the Fed's decision. Key events include the Fed's meeting on Wednesday, with potential decisions on rate cuts, dissents, economic forecasts, and the dot plot.

While the Fed is closely watching job data, inflation remains a concern, with headline CPI at 2.9% and core CPI at 3.1%, both above the 2% target. The president's assertion that inflation has decreased, particularly for groceries, is contested, with housing cited as a major hurdle. The impact of rate cuts on housing and mortgage rates is complex, as long-term rates, which influence mortgages, are not behaving in sync with short-term rates.

The relationship between Fed rate cuts, long-term rates, and mortgage rates is not a direct correlation. Historically, the 10-year Treasury yield has risen even when the Fed cut rates. If long-term rates were to decrease and mortgage rates followed suit, it could potentially increase demand for housing, leading to higher house prices.

• Markets are not expecting a large rate cut from the Federal Reserve, potentially disappointing the President.
• Empire Manufacturing data indicates a significant economic slowdown, which could support a Fed rate cut.
• Inflation remains above the 2% target, with headline CPI at 2.9% and core CPI at 3.1%.
• The impact of rate cuts on housing prices is complex and not a direct correlation, influenced by long-term rates.
• The Federal Reserve meeting is scheduled for Wednesday, with potential decisions on rate cuts, economic forecasts, and the dot plot to be released.

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Fed Decision and Market Expectations [00:00]

• Investors are awaiting the Fed's decision on interest rates.
• The president is pushing for a significant cut from the central bank.
• Markets are not anticipating a large cut and the president may be disappointed.
• A rate cut is still likely, but it might not be as substantial as desired.

This section highlights the anticipation surrounding the Fed's upcoming rate decision and the contrasting expectations between the president and the broader market.

Markets are not expecting a big cut and the president is likely to be disappointed. However, he is likely to get a cut.

Economic Indicators and Upcoming Events [00:31]

• This week is expected to be very busy with economic data releases.
• Empire Manufacturing posted a significant loss, suggesting the economy is slowing down.
• Retail sales and import prices on Tuesday will provide insights into consumer spending and the impact of tariffs on foreign exporters.
• The Fed meeting is scheduled for Wednesday, followed by jobless claims and Philly Fed data on Thursday.

This segment outlines the key economic reports and events scheduled for the week that could influence the Federal Reserve's monetary policy.

• Jobless claims and Philly Fed data could be influential, but their impact might be lessened as the Fed will have already met.

Fed Meeting Details and Potential Outcomes [01:24]

• The Fed meeting begins at 9:00 a.m. on Tuesday.
• The decision is expected at 2:00 p.m., with questions about whether there will be a cut and potential dissents.
• The meeting will also include economic forecasts and the dot plot.

This part focuses on the specifics of the Federal Reserve's upcoming meeting and the key information investors will be looking for.

Inflation Concerns and Housing Market Impact [01:34]

• The Fed is closely monitoring job data, which is a reason for a potential rate cut.
• Inflation remains relatively high, at 50% above their 2% target.
• The headline CPI number is 2.9%, and the core CPI number is 3.1%.
• The president believes inflation has decreased, particularly for groceries, but housing remains a significant problem.
• He suggests that a rate cut will help with housing costs.

This section delves into the current inflation situation, the president's views on it, and his hopes for how rate cuts might affect the housing market.

President Trump says, uh, first of all, that inflation is gone and it's come down on groceries, but he says housing is the main sticking point. That's the big problem. And he thinks this cut is going to help somehow with housing.

Housing Market Dynamics and Interest Rate Correlation [02:07]

• The impact of rate cuts on housing is uncertain and described as "iffy."
• Grocery prices are reportedly rising again, contrary to the president's statement.
• For housing, the long-term interest rates are more influential, affecting mortgage rates.
• The long end of the yield curve has not behaved as predictably as the short end.
• The Fed influences rates up to two years, but beyond that, investor expectations about future inflation play a larger role.
• If inflation expectations remain high, long-term rates may not decrease, potentially preventing mortgage rates from falling.
• The correlation between rate cuts and mortgage rate reductions is not a one-to-one relationship.

This segment explores the complexities of the housing market, the role of long-term interest rates, and the nuanced relationship between Fed policy and mortgage rates.

It's hard to say exactly what's going to happen. It's not a one for one correlation.

Historical Trends and Housing Price Implications [02:47]

• The last time the Fed cut rates, the 10-year Treasury yield actually rose.
• If long-term rates decline and mortgage rates become lower, house prices are expected to increase.
• Lower mortgage rates could encourage people who were previously locked into their mortgages to move.
• An increase in demand resulting from more people moving could lead to higher house prices.

This final part discusses historical patterns of interest rate movements and the potential consequences for the housing market and prices if mortgage rates decrease.

Because all of a sudden, the people who were locked in their mortgages that didn't want to move might start to move if you get enough cuts and then there's more demand and then prices are higher.