ExecutiveMessage
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4 BuildersOutlook 2024Issue9
ExecutiveMessage
Ray Adauto
Executive Vice President El Paso Association of Builders
The interest rate conundrum
The word conundrum means conflicting or confusion . And the recent action by the Fed certainly fits . Since the announcement of a fifty-basis point reduction the results are a little confusing . In my own way of explaining please indulge me .
In the brief period leading up to the announcement most economist had predicted some sort of a rate reduction would be coming ; however few predicted a full fifty basis points . According to my understanding the reason we had seen the Fed rate go up was because of inflation , and inflation is high in a significant way due to in large part the massive spending from government . The Consumer Price Index ( CPI ) is also tied to interest rates , normally when rising the Fed stays the course . In August , the Consumer Price Index for All Urban Consumers rose 0.2 percent , seasonally adjusted , and rose 2.5 percent over the last 12 months , not seasonally adjusted . The index for all items less food and energy increased 0.3 percent in August ( SA ); up 3.2 percent over the year ( NSA ). Not this time .
The fact that there is a Presidential election may or may not play a role in the reduction . As one of our member said after the announcement “ The Fed put out the economic projections today , while the comments were hawkish at the press conference what ’ s in writing is likely to be prioritized . The economic projections showed one hundred basis points being cut this year 100 basis points being cut next year , and fifty basis points being cut in 2026 .” Whatever the reason or reasons the
housing market needs all the help we can muster .
A couple of weeks ago I had the opportunity to be on a speakers panel at the WestCom commercial real estate conference , joined by Justin Chapman and Doug Schwartz . We were anticipating a rate cut , I said twenty-five basis points now , maybe more in an October surprise . Again , while it all helps , the underestimated culprit is over regulations and government policy .
So needless to say my conundrum is whether this rate cut will stick or come roaring back vigorously . Too much is resting on it to be played with . The Fed may yet be wondering the same thing . www • elpasobuilders • com
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