NAHB Analysis on Federal Funds Rate Hold03-26-24 | Economic News

NAHB Analysis on Federal Funds Rate Hold

Association's Forecast Contrasts Fed's Expectations
by Staff

NAHB anticipates fewer rate cuts due to inflation pressure and GDP growth, aiming to moderate mortgage rates.

The National Association of Home Builders (NAHB) provided analysis of the Federal Reserve's decision to maintain the federal funds rate at 5.5% during its March meeting. Despite the Fed's indication of potential future rate cuts, NAHB's forecast diverges, predicting only two rate cuts in the second half of 2024. This forecast is influenced by lingering inflation pressure and robust GDP growth conditions.


The Fed's optimistic economic outlook includes an upgraded GDP growth forecast for 2024, rising from 1.4% to 2.1%. Additionally, the long-run growth estimate increased from 2.5% to 2.6%, indicating the economy's capacity to handle higher interest rates.

However, NAHB emphasizes the impact of Fed policy on shelter/housing inflation, which accounts for over half of consumer inflation gains. The association underscores the importance of increasing attainable housing supply as an anti-inflationary strategy. Yet, higher short-term rates pose challenges by elevating builder financing costs and impeding home construction activity.

NAHB suggests that policy actions such as zoning reform and streamlining permitting could complement Fed monetary policy in combating inflation. Despite Fed expectations for rate cuts, NAHB's analysis provides a nuanced perspective on the interplay between monetary policy and the housing market's inflation dynamics.