Parker Sheppard - Research Fellow, Heritage Foundation Joins Houston's Morning News

Episode Transcript

Speaker 2 (00:00):
There're going.

Speaker 1 (00:00):
Maybe, you know, I'm always surprised they didn't do an
updata version of that. How long will interest rates stay high?
I mean, they really should have done an update on
that anyway. Parker Shepherd is with US research fellow the
Heritage Foundation. I guess when you think about though, Parker,
historically speaking, we do not have high interest rates. We
really don't remember what high interest rates are because most

(00:22):
of us aren't old enough to remember when we had
a ten or eleven or a twelve or thirteen percent
interest rate.

Speaker 2 (00:29):
Yeah. Absolutely, I am thankfully not old enough to remember
seeing rates that high. But it's certainly it's very high
relative to what we've seen over the past twenty or
thirty years, because we've seen runaway inflation that the FED
is trying its hardest to clamp down on. It's been

(00:52):
trying to deal with the after effects that have come
from a lot of the pandemic spending spree from the
America and Rescue plans, stimulus spending. And what we're going
to look at this next meeting is to see how
they're going to try to finish the job as they
can bring inflation all the way back down from these
highs that have been the highest that we've seen in

(01:15):
recent memory.

Speaker 1 (01:16):
Well, certainly it's the interest you know, it's a lot
lower than it has been. The inflation rate has slowed
down some. There are notable exceptions, such as egg prices,
which we all know is its own separate thing. You know,
the Middle East coul affect oil prices. It is right now,
that's one of those things that's a little bit uncontrollable.
But I have to wonder what do you think it
will take. We know that the big part of DOGE

(01:40):
is to cut government spending. That's certainly a big component,
don't you think in trying to get to the point
where they fed feels comfortable lowering interest rates is we've
got to get our government spending under control.

Speaker 2 (01:51):
Absolutely. DOSE is doing a great job of finding things
that are unnecessary that they can eliminate because government spending
is way too high, is not sustainable. Several outlays are
running about six percent ahead of where they were in
the previous fiscal year, and the economy is not growing
at six percent, And so what happens when the government

(02:14):
spends more than it has the ability to raise in
tax revenue is that it's either going to add to
the debt, which there's a limit to how much they
can run to that where they're eventually going to find
a way to resort to the monetary printing press and
try to pay for everything through raising funds in the
inflation tax by eroding the real value of people savings.

Speaker 1 (02:36):
One of the areas that certainly has suffered from inflation
and certainly has seen a great decrease, I mean historical
decrease is home sales. We just aren't selling a lot
of homes right now with mortgage interest rates being what
they are. If we could get the mortgage interest rate
down around five percent, how much of a difference do
you think we would see in that particular sector.

Speaker 2 (02:58):
I think home prices the major driver in inflation right now.
You can look the Atlanta Fat has a sticky price
CPI where they divide the items in the CPI between
goods that change rapidly in price and goods that change
slowly in price. And it's even higher than core CPI,
which is even higher than the headline CPI. Their flexual

(03:20):
priced version of that is hovering around zero. So when
the feed is keeping rates high, the prices that can
respond quickly are responding. And what's left is that's really
taking a long time to get wrung out. Is this
pricing in the housing market, where things are freezing up

(03:41):
because people that were able to lock in interest rates
at the bottom are loads to go back on the market.
It just shows the importance of keeping a stable and
steady interest rate policy, no doubt.

Speaker 1 (03:53):
Yeah, I'm giving up by two point eighty six percent,
Thanks for sure, all right, Parker, thanks for joining us.
Appreciated Parker Shepherd, Research Fellow at the Heritage Foundation. That's
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