Another week has slipped by with no sign of a date for Fed Chair Jerome Powell’s semiannual monetary policy testimony or a confirmation hearing for Kevin Warsh to return to the Fed Board of Governors and the Fed Chair. With Congress preparing to head out to the work period of March 30-April 10, it will likely be mid-April before the hearings are scheduled. Scheduling Powell’s appearance will butt up against the communications blackout period around the next FOMC meeting on April 28-29. In the meantime, Fed policymakers will be watching the economic data to see how employment and prices are faring in the wake of the attack on Iran on February 28.
The March 27 week had little economic data that could compete with the geopolitical headlines and little that could clarify the outlook for the US economy. The most timely reports are the March manufacturing surveys from the Richmond and Kansas City Feds which add to the information from the New York and Philadelphia reports issued in the prior week. Measures of current activity were taken early in the month and are not enough to show if the war is impacting on conditions in the factory sector. For the moment, the story is one of modest expansion in the factory sector. The indexes for prices paid show that higher energy prices were only just beginning to be visible for input costs, if at all.
The news for the housing market is likely to be less good at the start of the spring buying season. An uncertain economic outlook and worries about job security, and still elevated home prices and narrow supply are not favorable conditions. However, it is the sudden uptick in mortgage interest rates that will probably tip the balance and restrain home buying in the coming months. The war on Iran changed affected the US treasury market and consequently the momentum for mortgage rates. The Freddie Mac average rate for a 30-year fixed rate mortgage had fallen to 5.98 percent in the February 26 week, its lowest since 5.89 in the September 8, 2022 week. Since then it has climbed 40 basis points to 6.38 percent in the March 26 week. This is enough to halt refinancing activity and give pause to those seeking to qualify for a new mortgage.
The recent jump in gasoline prices is enough to have a meaningful negative impact on consumer discretionary spending. The EIA price for a gallon of regular gasoline was $2.937 in the February 23 week and is up to $3.961 in the March 23 week.
