Loud News Week (At Least Economically)

Jerome Powell held his final press conference as Fed Chair on Wednesday. They held rates steady. Again. For the third consecutive meeting. I guess that was expected but what nobody really anticipated was what happened around that decision: a 4-person dissent, the first split of that magnitude since October 1992. Oh and, Powell announcing he is staying on the Board of Governors indefinitely, and the incoming Fed Chair Kevin Warsh quietly signaling that he intends to rewrite the rules on how we even measure inflation…for boring economic news, it felt pretty wild. 

And of course, all of this matters for your real estate strategy. 

Jerome Powell's Exit Interview 

Wednesday's meeting was Jerome Powell's final one not because he’s going to jail for overspending on the remodel or even for being a “bad Fed chair.”  His term ends on May 15. But it seems he won’t be going quietly… 

Powell announced he will remain on the Fed's Board of Governors, citing what he called unprecedented legal attacks on the central bank's independence by the Trump administration. His exact words, “My concern is really about the series of legal attacks which threaten our ability to conduct monetary policy without considering political factors.” Not to get political but it seems like a fair concern to consider whether or not we really want the central bank to remain politically neutral… 

Not my topic for today, I’ve covered it in the past. 

His decision to stay denies President Trump an immediate opportunity to appoint a new governor to the central bank's seven-member board. So Powell is making something very clear: he believes the Fed's independence is worth fighting for, even from inside the building remodel, even as a former chair. 

His final words before leaving the podium were: “Thank you very much, everyone. I won't see you next time.” He put his glasses in his suit pocket and walked out. There was brief applause from reporters. It felt like a moment of sorts. Eight years this guy served. Fifteen rate hikes. Eleven rate cuts. Two emergency pandemic meetings. And an exit that looked more like a constitutional standoff than a retirement. 

Whatever you think of Jerome Powell's tenure, that last press conference was unusual. 

The 8-4 Vote Nobody Saw Coming 

The last time four FOMC members dissented was October 1992. That got my attention as mortgage bonds blasted into the red. 

The split went like this: Fed Governor Stephen Miran wanted to cut rates by a quarter point. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan voted to hold…but did not support the statement's easing bias. 

That last part is the important one. The three dissenters weren't saying the economy is fine and we should hold forever. They were objecting to the Fed's language - specifically a phrase that implied the next move would likely be a cut. The statement included the word additional in reference to future rate adjustments, implying further cuts are coming. Three officials didn't want to promise that given where inflation is right now. 

Translation: the Fed is divided not just on what to do, but on what to say. And in today’s world of stories mattering more than math - what you say is almost more important than what you do. 

Even though the Fed’s dot plot still technically shows one cut penciled in for the year, markets are now pricing in no rate changes for the rest of this year and well into 2027. If that holds, buyers and sellers need to stop waiting for rate relief to save them and start working with the market they actually have. The crazy thing is, as upset as we all are about the recent spike in mortgage rates – we’re still right around 6 percent. Where the economists had predicted we would be all this year. 

Kevin Warsh’s New Inflation Rules 

If you work with buyers or sellers or you are a buyer or seller watching rates, this next part will be especially interesting. 

Kevin Warsh, Trump's nominee to replace Powell, passed out of the Senate Banking Committee on a party-line vote Wednesday morning. His full Senate confirmation is expected soon. And when he takes the chair, he has already telegraphed that he intends to change how the Fed measures inflation. 

Right now, the Fed's preferred inflation gauge is called the Core PCE - Personal Consumption Expenditures index, excluding food and energy. It has been the standard for decades. Warsh wants to go further by stripping out extreme price shocks when calculating overall inflation. His words at his Senate hearing: What I'm most interested in is what's the underlying inflation rate - not what's the one-time change in prices because of a change in geopolitics or change in beef. 

In other words -- strip out the war. Strip out the oil spike. Strip out the beef prices. Show me what inflation looks like underneath all of that. Basically the opposite of supply chain management and logic but what do I know, my degrees are in Broadcast Journalism and Psychology. 

On the surface it does sound reasonable - it might be?! But here is the catch that Bank of America's economists flagged immediately: by trimming only the most extreme readings, some more minor spikes - perhaps caused by food and energy prices - could actually creep into the inflation reading and cause it to be higher than the Fed's current preferred view. A trimmed-median inflation gauge tracked by Bank of America was actually higher than the core PCE in both 2019 and 2020. 

That means Warsh's new measuring stick could show more inflation, not less. Which would mean higher rates for longer. Oh shit, that’s a Powell line isn’t it? The exact opposite of what Trump has been publicly demanding. 

If inflation reaccelerates under Warsh's framework, he may find himself compelled to raise interest rates - doing precisely the opposite of what the president who nominated him had in mind. 

Nobody is talking about this enough. 

The PCE Numbers That Dropped This Morning 

Which brings us to yesterday. This is all theoretical until you look at the actual data, but we got some of that on Thursday. 

The core PCE price index (yes, the same Fed Favorite measure I was just discussing) accelerated a seasonally adjusted 0.3% for the month of March, pushing the 12-month inflation rate to 3.2%. Headline prices rose 0.7%, putting the annual level at 3.5%. All readings came in line with consensus but not in line with the 2% target. Not even close to the 2% target. And the headline number - the one that includes food and energy, the one that captures what you actually feel at the gas pump and the grocery store - came in at 3.5% annually. 

One economist described it this way: this is a split-screen economy. Companies and investors involved in AI are on fire. Meanwhile, middle- and moderate-income households are struggling with high gas prices and inflation that's back at its hottest level in three years. 

That split-screen economy is remarkably similar to what I have been describing in the housing market for weeks. It’s like the macro confirmation of what buyers and sellers in Reno are already feeling in their bones. 

Here is why this matters for housing more specifically: the Fed cannot cut rates when core inflation is running at 3.2% and headline is at 3.5%. Full stop. Even if Warsh rewrites the measuring framework, even if you strip out oil and energy, inflation is still above target by any honest read. The war tax is now showing up in the official numbers, not just in consumer sentiment surveys. 

What This Means for Buyers and Sellers Right Now 

Let me bring this all the way home. 

The Fed held. Powell is staying - but leaving the chair. Warsh is coming in with a new framework nobody fully understands yet. Inflation just printed above target. And markets are pricing in no rate cuts for the rest of 2026 and well into 2027. 

If you have been waiting for rates to drop before you buy or list -- that signal is not coming this year. Possibly not next year either. 

Buyers have to learn to read a market that is more fragmented, more localized, and more psychology-driven than ever before. The confidence tax is real. The war tax is real. And both of them are showing up in your neighborhood – sometimes in completely different ways on the same street. 

Every house is still its own market. The macro data tells us about the environment. It doesn't tell us a strategy to use inside of it. That part still requires a local, active expert.