Preston Brashers - Research Fellow, Heritage Foundation Joins Houston's Morning News

Episode Transcript

Speaker 1 (00:00):
You know, one of the interpretations of this song it's
not about shocking monkeys, literally shocking monkeys, But there's a
lot of interpretations. One of the interpretations was that it
was about the pain caused by high interest rates implemented
by Paul Volker back in the day to fight inflation.
So I guess we've had, you know, not really high

(00:21):
interest rates from a historical perspective, but certainly we've had
higher interest rates than we have grown used to. Now
the Fed is cutting those rates again quarter point yesterday,
join us to talk about is Preston Busher's research fell
at the Heritage Foundation. Of course President Trump doesn't think
it was enough. Do you think it was enough?

Speaker 2 (00:40):
It seems like the Fed has been taking a measured
approach here. I think I think the twenty five basis
points was in line with what most people expected. There was.

Speaker 1 (00:49):
There was.

Speaker 2 (00:50):
Out of twelve votes or the twelve governors, ten were
looking for the twenty five basis points. One wanted to
keep it flat and one wanted to go fifty basis points.
So there was nothing unexpected, I would say, in terms
of what happened at this meeting. If there was anything unexpected,
it was really about what was going to happen at the.

Speaker 1 (01:07):
Next meeting, right, and it's kind of the signal at
least the interpretation of the signal is that that may
have been the last cut for the year. Do you
think that's the case.

Speaker 2 (01:16):
I lean towards there is still being one more rate cut,
whether it's this next this next meeting in December, or
the first one of the next year, and probably I
think still in December. But it did definitely seem like
Jay Powell was trying to give himself the leeway, and
then he was seeing that there seemed to be a

(01:36):
presumption that everyone thought that there was going to be
at least one more rate cut in December, and he
kept saying over and over again that was not a
foregone conclusion. At one point said he said it was
far from it. So he was definitely giving himself a
little bit of leeway. And then the markets did notice
that and they dropped with it off after he made

(01:59):
those statements.

Speaker 1 (02:00):
I think President Trump refers to him now as Drome
too late Powell, because he thinks he's always behind the
curve on this. Do you think that's a legitimate criticism.

Speaker 2 (02:08):
I would say it's a legitimate about some of his past.
Certainly in terms of when he was in the FED
chair during the Biden years, he started tightening way too
late in terms of allowing the inflation to get out
of control in the first place. So there has been
a track record I think of that, and right now

(02:30):
I think it's you know, it's a question. I don't
think we're way off though some of these other decisions
that it's felt like it's been way late. Here it
looks like we're you know, you can argue I think
about twenty five basis points here or there. I think
there's reasonable people that can disagree, But we're getting a
lot closer to kind of that neutral range where most
of the people would think somewhere in the three to

(02:52):
four percent is a pretty neutral place to be for
interest rates.

Speaker 1 (02:56):
There's no direct correlation right between mortgage rates and the
FED rate. It's tied to other things. Treasury bonds comes
to mind. But we have seen mortgage rates going down.
I think we're about the lows that we've been in
at least a year and a half. Do you sense
any trend of where we're going with that? Because you know,
just about everybody I talked to seems to think that,

(03:17):
you know, five five and a half percent mortgage rate
is a magic number to get the housing market moving again.

Speaker 2 (03:24):
Yeah, it's a pretty weak relationship there. You've seen rake
cuts before and it doesn't really move the mortgage rates.
I don't have a great feel for that. One thing
I will say that it came out of this meeting, though,
is the FED did say that or j Palace did
say that the FED was going to kind of unload
some of these mortgage backed securities that they were holding,

(03:45):
so that could could have some impact potentially a little
bit softer demand for housing because of that, a little
bit less of this kind of artificial subsidization of the
housing market coming from the FED.

Speaker 1 (03:59):
Right, Thank you, sir, appreciate your insight. That's Preston Brosher's
research fellow with the Heritage Foundation.