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Last week was an interesting one. First, we had a handful of housing reports beat market expectations despite higher rates. Home builder confidence, building permits, housing starts, and pending home sales all surprised the market to the upside. I’ll also add that the purchase application index, according to the Mortgage Bankers Association, was up 8% YoY, signaling stronger demand. Meanwhile, Federal Reserve Governor Christopher Waller, who was in the rate cut camp, has now turned hawkish, essentially telling the housing market to abandon the “rate‑relief is right around the corner” narrative.
In his guest lecture at the European Central Bank in Frankfurt, Christopher Waller delivered a significant policy U-turn, shifting from his previous pro-rate-cut stance to a distinctly hawkish outlook driven by persistent inflationary pressures. While Waller noted that the U.S. labor market has stabilized with a low and steady unemployment rate, he expressed growing alarm that the prolonged conflict in the Middle East has triggered energy and commodity price shocks that are actively bleeding into broader goods categories. Admitting that “inflation is not headed in the right direction,” Waller stated that he now supports removing the FOMC’s traditional “easing bias” language from its policy statements. He signaled a complete rebalancing of the policy path, warning that the likelihood of an interest rate hike is now completely equal to that of a rate cut — if inflation continues to stall or if long-term inflation expectations begin to drift upward.
Click the link below to view my weekly housing and macroeconomic update.
