We'll go over the metrics, and then Warsh's take on those same metrics and how they might influence our outlook.
Housing: No surprise to anyone in housing. FHFA's HPI and Case-Shiller's Home Price Index both reported June essentially flat. FHFA was at 0% MoM, and Case at .2% for the month which puts homes at about 2% annualized.
New Home Sales for July were a big miss, down 10.5% MoM and 6.3% YoY well below the consensus.
No surprise, consumer confidence was at 89.4, below the prediction of 90.2 and the weakest since January. While that confidence is slightly higher for the current economic situation, expectations went down 5.8 to only 68.2, putting it well under the 80 point threshold.
Inflation? PCE came in at .2% MoM, annualizing us at 3.3% and in the good new category. Savings rate was even at 3%. Good news, right?
Labor? Down 4K for the week with 203K initial claims, and insured unemployment at 1.2%.
Now, Warsh.
The Hall of Mirrors: He gave a really good synopsis on why he wants to decrease forward guidance: It causes the markets to watch the Fed, while the Fed is watching the market. That creates circular feedback loops, and I agree with him on that.
Inflation: He's not buying into the calmer inflation story. He pointed out that the 6 month inflation is at 4.1%, and doesn't paint the picture of calmed inflation. He broke up PCE into components and showed 54% are still showing price increases over 3%. Prior to the pandemic, only 32% showed above 3%.
He doesn't believe labor is a concern, and that they're still at historic lows.
He committed to discipline over a specific decision and acknowledged that the Fed owns up to the inflation situation. He also pointed out that housing and agriculture are showing strain and then how ridiculous AI spending and profit is right now.
Overall, I think he's gearing up for a rate hike. I don't like it, and I think he knows others aren't going to like it.