Monday Moneybeat: Interest rates and the housing market

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: Interest rates will remain as they have been since December. But the Federal Reserve last week did signal that a rate cut is more likely if trade tensions continue and global economic growth doesn’t pick up.

The Fed’s so-called dual mandate is to set monetary policy to promote price stability and maximum employment in the United States. Basically, inflation is below the Fed’s target of 2 percent and unemployment is at a 50-year-low.

So why the concern about international trade and sluggish foreign economies? The primary reason is the spillover effects here, because of the interconnectedness of economies. To flip the cliched saying around: If Europe and Asia sneeze, the United States might catch cold.

Fed chairman Jay Powell.

POWELL: It’s really trade developments and concerns about global growth that are on our minds. So we’re not exclusively focused on one event or one piece of data. Risks seem to have grown.

And so if those risks continue, it’s very likely the Fed will cut interest rates at its July meeting. Right now it’s between 2-and-a-quarter to 2-and-a-half percent, and the central bank typically moves the rate up or down a quarter point at a time. Up to slow the economy and blunt the risk of inflation, down when economic growth is at risk.

REICHARD: On the trade front, all eyes are on a meeting between President Trump and President Xi Jinping of China. The two will have a face-to-face while in Japan for meetings of the biggest industrial economies, the so-called Group of 20 summit.

Washington and Beijing have been tussling over trade, and right now the two have hit each other with punitive tariffs on consumer goods. The hope is the two heads of state can resolve their differences and lift the tariffs—or at least make some progress toward the goal.

That the two agreed to meet lifted American stocks. The Standard and Poor’s 500 index hit a record high by Thursday, though it did tail off a bit before Friday’s close.

So for the week, the S&P rose 2.2 percent, the Dow Jones Industrials gained 2.4. The Nasdaq added 3 percent and the Russell 2000 picked up 1.8.

EICHER: One last economic data point, the housing market saw a ray of hope, even if it hasn’t recovered fully.

The National Association of Realtors reported that home sales picked up 2.5 percent in the month of May. That’s driven in large part by lower costs of borrowing. Longer-term mortgage rates have dropped almost a full percentage point year on year.

And that is this week’s Monday Moneybeat.

(AP Photo/Rogelio V. Solis) This June 13, 2019, photo shows a house with a “sold pending” sign fixed on the realtor’s sign in northeast Jackson, Miss.

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