On Friday, the Bureau of Economic Analysis will release the updated Personal Consumption Expenditures (PCE) price index, often referred to as the Federal Reserve’s preferred measure of inflation. As the Fed has kept rates higher for longer, parts of the US economy have had to adjust.
MacroPolicy Perspectives founder and president Julia Coronado joins Morning Brief to give insight into the upcoming PCE print, from its economic implications to its impact on future Fed policies.
Coronado says that the Fed risks "binding" implications in the housing sector without action on rate cuts: "When it comes to housing supply…high rates do impede supply. There still is excess supply of multifamily housing coming onto the market. This will be a full year of excess supply, more than likely, which is going to keep downward pressure on rents. The Fed is going to need to begin lowering rates soon if it doesn’t want a more binding bottleneck in supply to materialize over the next couple of years. At these rates, we are not seeing interest in building housing, and we know we need more supply there, so I think it will be very constructive for the Fed to at least initiate a sequence of cuts."
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