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Authored by Mike Shedlock via MishTalk.com,

Fed Chair Jerome Powell meets with Congress this week. He will face pressure on two different fronts.

Image courtesy of Mortgage News Daily, annotations by Mish

Pressure on Two Fronts

Bloomberg reports Powell to Face Pressure on Rates From Democrats, Bank Rules From Republicans

Elizabeth Warren Hoot of the Day

Home prices are at record highs. Just what does she think will happen to home prices and inflation if Powell cuts rates too early?

Small businesses are struggling but why is that?

The answer is Biden’s free money to students, Biden’s regulatory madness, Biden’s union push, and massive minimum wage hikes, especially in places like California are all highly inflationary.

The Fed’s Big Problem

On average, the economy looks OK. But averages are misleading. Several large groups of people are struggling. They all have one thing in common.

Case-Shiller home price index, CPI rent index, and the index of hourly earnings for production and nonsupervisory workers.

The Fed’s Big Problem is There Are Two Economies But Only One Interest Rate

Winners and Losers

• The homeowners are generally doing OK. The home ownership rate is 65.7 percent.

• The 34.3 percent who rent are generally not doing OK.

The study did not break things down by home owners vs renters, but I suspect most of the use is by renters.

According to the latest CPI report, rent was up at least 0.4 percent for the 29th straight month. Shelter, a broader category, rose 0.6 percent. Food rose 0.4 percent.

CPI data from the BLS, chart by Mish

Credit Card and Auto Delinquencies Soar

Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.

Record High Credit Card Debt

Credit card debt rose to a new record high of $1.13 trillion, up $50 billion in the quarter. Even more troubling is the surge in serious delinquencies, defined as 90 days or more past due.

For nearly all age groups, serious delinquencies are the highest since 2011 at best.

Auto Loan Delinquencies

Serious delinquencies on auto loans have jumped from under 3 percent in mid-2021 to to 5 percent at the end of 2023 for age group 18-29.

Age group 30-39 is also troubling. Serious delinquencies for age groups 18-29 and 30-39 are at the highest levels since 2010.

For further discussion please see Credit Card and Auto Delinquencies Soar, Especially Age Group 18 to 39

Generational Homeownership Rates

Home ownership rates courtesy of Apartment List

The above chart is from the Apartment List’s 2023 Millennial Homeownership Report

Those struggling with rent are more likely to Millennials and Zoomers than Generation X, Baby Boomers, or members of the Silent Generation.

The same age groups struggling with credit card and auto delinquencies.

On Average Everything is Great

Average it up as Fed and all the clueless economic and political writers do, and things look great.

This is why we have seen countless stories attempting to explain why people should be happy.

Hello Mr. Powell

There are two economies (the homeowners/asset holders and everyone else). However, there is only one interest rate. Patience please says Powell.

Lowering rates risks risks fueling the housing bubble and the most expensive stock market in history.

It’s Powell’s move. No matter what he does Elizabeth Warren will howl.

She wants lower interest rates, but that will stoke inflation and it will not do a damn thing for renters who don’t have a down payment and cannot a house no matter what the mortgage rate is.

This is a dilemma of the Fed’s making and there is no solution.