Did Fed Doom The Economy? What 'Policy Error' Means For Jobs, Home Prices | Danielle DiMartino Booth

Summary

Danielle DiMartino Booth criticizes the Fed for holding rates steady despite a fragile labor market, collapsing business investment, and disinflation that she says leaves market-based core PCE at -0.3% y/y. She warns of a policy error and recession risk, citing weak job openings, continuing claims, and consumer credit stress. On markets, she says US equities can stay near record highs if yield-seeking savers remain invested, while housing and homebuilders face falling prices, tight lending, and record incentives. She also flags rising corporate credit defaults and private equity bankruptcies.

• Fed held rates unchanged; two dissents favored cuts.
• Danielle argues the Fed is making a policy error because the labor market is fragile and inflation is actually low.
• She sees recession risk from collapsing business investment and job-market deterioration.
• She expects corporate credit stress and private equity defaults to rise.
• She says US equities can stay near highs while money market yields and speculation support flows.
• She warns housing is weakening: falling prices, tight lending, foreclosures, and homebuilder incentives.
• She doubts 25-50bp cuts would fix housing affordability.
• She cites rising high-income delinquencies and student loan payments resuming as consumer risks.