| The Fed is expected to announce that it’s holding rates steady at 2 p.m., followed by a press conference with Powell at 2:30 p.m. … The ADP jobs report for January is out at 8:15 a.m. … Latest Employment Cost Index data released at 8:30 a.m. … Treasury quarterly refunding announcement at 8:30 a.m. … House Financial Services holds a hearing on proposed banking regulations at 10 a.m. … Senate Budget has a hearing on housing affordability at 10 a.m. … Senate Banking digs into artificial intelligence and housing at 10 a.m. … What’s going on with housing? — There’s another thorny question facing the Fed. Shelter inflation — which includes the cost of rent, as well as “imputed rent,” which measures how much a homeowner might rent their house for — is a big piece of remaining inflation. New leases have been coming down for many months now, but it’s unclear how long it will take for those effects to feed fully into the inflation data, which reflects those real-time shifts with a lag. “Fourth quarter nationally, rents came down just a little bit, probably less than 1 percent or maybe around 1 percent, and the first half of next year probably also negative, and maybe a little positive in the second half,” Fannie Mae’s Doug Duncan told MM. “But there’s a million units estimated to come on between ’23 and ’24, and Austin is perhaps the poster child for excess supply bringing rents down, something like 3 percent in the fourth quarter alone.” But he also said house prices rose about 7 percent in 2023, and his shop is projecting they will grow a further 3 percent this year, pushing up owners’ equivalent rent. “I think that’s why the Fed is being careful about what they say about having locked core [inflation] down at 2 percent,” he said. “I think they’re concerned about that.” If the Fed cuts rates, a significant decline in mortgage rates would push home prices up, Duncan said. “While the interest rates fall and that would help affordability, it’s going to get offset by price increases if that decline is more rapid than supply can respond,” he said. “And it still takes longer to build a single-family house today than it did 20 years ago, just because they’re more complex and supply chains are more difficult.” First look: Hearing prep — The Senate Budget Committee is holding a hearing this morning on housing affordability, which Chair Sheldon Whitehouse (D-R.I.) says is a particularly dire issue in his home state of Rhode Island, where “there are currently no communities where families earning the state’s median income can afford to buy a typical home, and there’s only one town where Rhode Islanders earning the state’s median income can affordably rent,” according to his prepared opening statement. “Over these next few months, I will be introducing bills to make housing more affordable for lower-income Americans,” his statement says. “Next month with Congressmen Panetta and Blumenauer, I will propose a $15,000 first-time homebuyers tax credit for lower income Americans — refundable advanceable and available for homebuyers at the time of purchase. … Ensuring access to safe and affordable housing is a moral and economic imperative. I hope it is something that we can find common ground on and advance this year.” First in MM: Crypto PACs raise $85 million — Our Jasper Goodman: A network of pro-crypto super PACs has raised $85 million in its push to influence the 2024 elections, according to a spokesperson for the group. Campaign finance filings set to be released this week will show that the industry-backed PACs brought in $79 million last year, the spokesperson said, and they have raised an additional $6 million this month. The group includes the Fairshake PAC, which has already begun spending to influence races, and a pair of other affiliates, Protect Progress and Defend American Jobs. The crypto firms Coinbase and Ripple and the venture capital giant Andreessen Horowitz have each given more than $20 million to the PAC network, including donations from executives and the firms themselves. “The crypto community is united to help elect leaders who support American innovation and job creation,” Josh Vlasto, a spokesperson for the group, said in a statement. Job quitting fell last year — Americans quit 6.1 million fewer jobs last year than in 2022 — a decline of 12 percent — with quits falling in December to the lowest monthly level in nearly three years, WSJ reports. No longer driving the day — From our Declan Harty: The SEC was supposed to get together this morning to usher in the latest Treasury market reform of Chair Gary Gensler’s agenda. But the agency hit the pause button late Tuesday, rescheduling the vote on its so-called dealer rule until next week. “As the Chair has said, the Commission moves to adopt rules only when the staff and the Commission think they are ready to be considered,” an SEC spokesperson told our Declan Harty. “In this case, we’re taking a few more days.” The proposal, as drafted, would put a broad swath of speedy Wall Street traders dealing in the $26 trillion Treasury market under new regulatory scrutiny. But many hedge funds and other investors have voiced concern about getting roped in, too.
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