Former Fed economist says the Fed is needlessly delaying rate cuts – “the risks are real”

Claudia Sahm in the Financial Times (gated).

Sahms argues that the rise of 525bp in the Fed Funds rate in 2 years, while placing the housing market under pressure, is also squeezing prices higher as people who have low, fixed-rate mortgages are unwilling to sell. New buyers face

  • higher mortgage rates
  • high home prices
  • a lack of homes available to purchase

Resilience in the rest of the economy is not a sure thing to continue. And credit markets and banks are under strain.

Sahm concludes:

  • Its hard to say where the pockets of weakness are now. but the longer rates stay high, the more the Fed risks seriously damaging the economy.

On Thursday we had the retail sales data from the US for January, very weak:

There were substantial revisions lower for the December and November retail sales data also. Cracks appearing?

This article was written by Eamonn Sheridan at www.forexlive.com. Source