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Fed’s Evans says interest rates should rise to 4.50%-4.75%

Yahoo Finance's Akiko Fujita and Ines Ferré discuss the latest commentary from Fed officials and economic data.

Video transcript

AKIKO FUJITA: Yeah, and so let's talk about what we have heard from the Fed. We are keeping an eye on a slew of Fed speakers this week as the central bank's quest to bring down inflation persists. Chicago Fed president and known dove Charles Evans says it will need to raise rates to a range between 4 and 1/2% and 4.75%. That is higher than his previous stance. Now the Cleveland Fed's Loretta Mester says officials will need to keep restrictive policy in place for longer, given the current state of inflation. Meanwhile, Susan Collins of the Boston Fed saying the goal of a more modest slowdown, while challenging, is achievable.

Worth highlighting what we heard from Charles Evans. This was in an interview that he gave to CNBC, where he also raised concerns about the Fed moving too fast too quickly. And it's worth noting that because that has kind of been the concern here about this lagging indicator about whether, in fact, we have seen the impact from those super sized hikes that we've seen from the Fed and whether, in fact, the Fed should be moving even more aggressively when those impacts haven't necessarily taken hold yet.

INES FERRE: Exactly, and so many experts that have told us that you won't see those impacts for somewhere between six to nine months. So what type of impacts will these rate hikes that have already taken place have on the economy? And people point to the housing market. Look, we got new data for new home sales unexpectedly increasing in August from the prior month. But still, the median price for a new home dropping 6.3% month over month. We also saw a decelerating growth for home prices in the S&P CoreLogic Case-Shiller Index. So definitely seeing a slowdown when it comes to housing.

AKIKO FUJITA: Well, and to your point on the number that we got from July in terms of home prices, that is the fastest decline that we have seen in terms of the rate of decline in history. Important to note that because, of course, as we look across the economy here, housing is sort of often the leading indicator of where things are headed. The Fed, of course, trying to cool things down a bit to bring down inflation, but also prevent it from a hard landing, which would lead to what some are worried is a prolonged recession.

INES FERRE: Yeah, and definitely, you see it in the industry. You hear from industry leaders in the housing market. And look, even Jerome Powell had said in the previous-- after the previous meeting-- I believe it was one of the speeches where he said a housing reset. So he used the word "reset." So definitely, the industry is expecting a slowdown in housing. And we are starting to see that.