ATLANTA, GA - NOVEMBER 08: Community members arrive to their local polling location to vote on November 8, 2022 in Atlanta, Georgia. After months of candidates campaigning, Americans are voting in the midterm elections to decide close races across the nation. (Photo by Megan Varner/Getty Images)

The economy is top of mind for caregiver and driver Jennifer Garner as the U.S. heads toward the November presidential election.

Garner, 46, lives in Cleveland and can bring in about $800 a week working extra hours at both jobs. But between debt payments on $56,000 in student loans and $1,300 in rent — among other monthly bills — the money doesn’t go far enough.

She voted for Biden in 2020, but says now that she’s researching other candidates — although she has ruled out former President Donald Trump.

Black voters overwhelmingly supported President Joe Biden in 2020 and were key to his win, but as many like Garner struggle to make ends meet now, there is some evidence that Black voter enthusiasm for Biden may be slipping. And Trump is hoping to capitalize on that. He spoke last month at a meeting of the Black Conservative Federation and he argues that Black voters were better off financially when he was in office. Even if Black voters don’t buy that message, voters’ frustration could result in them turning to a third party candidate, Cornell Belcher, a pollster who worked for Barack Obama, told The New York Times.

To counter Trump, the Biden campaign is spending millions on radio ads in swing states at Black-owned and Latino-owned radio stations to point out the administration’s accomplishments, including investments in historically Black colleges and universities through grant funding and the American Rescue Plan Act, the cancellation of student loan debt for 3.9 million borrowers, and reducing Black child poverty in 2021, which it has connected to the then expansion of the child tax credit.

“I have to work two jobs overtime just to even try to cover my rent, which means I have no time to be able to enjoy life, period,” Garner said. “The only way things are going to get better is if people start talking and just let them know the economy sucks. We need better jobs and more money.”

According to a January NBC News poll, 75% of Black voters said they would vote for Biden in the general election this year. In 2020, 92% of Black voters cast their votes for Biden, a Pew Research Center report shows. This criticism of the economy lines up with surveys about Black voters’ financial experiences.

A May 2023 report from the Joint Center for Political and Economic Studies found that 30% of Black people said their financial situation had worsened over the past year, compared to 44% who said it had stayed the same. Although key economic indicators that economists look to to understand the state of the economy have shown a stable labor market, slowing inflation, and rising wages, it’s clear that many Black voters are still feeling the financial pressure of high prices at the grocery store, an expensive housing market, and the burden of student debt payments restarting.

On Monday, Biden announced another student debt relief proposal to cancel accrued interest for 23 million borrowers, with up to 25 million receiving some kind of interest cancellation. Under this new plan, 4 million borrowers would also have their student debt canceled entirely and 10 million borrowers could benefit from $5,000 in relief. It’s unclear when exactly the Biden administration will release a formal proposal.

Keisha Deonarine, director of opportunity, race and justice at the NAACP, shares the frustrations many Black voters say they have with the financial burden of student debt. She said before Biden’s Monday announcement that the president needs to push harder to cancel student debt to have a lasting impact on the economic experiences of Black Americans and many other voters.

“If we really want to think about four-year degrees and we want to think about middle class America, we’ve got to cancel student debt,” she said.

Deonarine said she’s encouraged by the Biden administration’s work to reduce and provide more transparency on junk fees, however, which includes regulations to reduce credit card late fees. She said that could help reduce costs that put stress on voters’ household budgets.

Audrianna Lewis, who voted for Biden in 2020, is one of those voters. She has to budget for high rent and healthcare costs.

Lewis, 32, works in Hattiesburg, Mississippi, as a customer service representative for Maximus, a government contractor that helps administer Medicaid, Medicare, and other programs. She makes $17.78 an hour and has about $9,000 in student debt. Her rent has gone up from $860 last year to $1,000 this year.

On top of her climbing rent and student debt, Lewis has asthma and said her healthcare doesn’t sufficiently cover her breathing treatments, which has required her to go into her savings. She said her coworkers are also struggling financially.

“Some of my coworkers are homeless,” she said. “People are not able to pay for doctor visits and prescriptions.”

In March of last year, Black people’s unemployment rate hit a record low and the economic recovery shows that by historical standards, Black and Hispanic workers have had faster wage growth these past few years. The unemployment rate for Black people has begun to tick up again, but economists say they’re waiting for more data before considering it a long lasting trend.

But Melanie Campbell, president of the National Coalition on Black Civic Participation, said the unemployment rate for Black Americans does not tell the whole story.

“The other part of that message has to do with, ‘OK, I may be employed but I’m still working three jobs just to pay my rent,’” she said.

Sarah Wallace, 49, a Philadephian who lives on Social Security Disability Insurance, says she has to spend the lion’s share of it on $1,500 in rent each month. She voted for Biden in 2020, but said she may vote third party this time.

“I think Biden sold all of us on his dream to get into the office … And that was that,” she said.

Wallace said she doesn’t believe the economy has improved under Biden and that she doesn’t see inflation easing enough to make a difference for her at the grocery store.

“Buying food, you’re never buying the most healthy [food] because they’re more expensive. So you kind of have to improvise what you can do, you know?” she said.

Wallace, who has more than $200,000 in student debt and said she struggles to get Ozempic to treat her diabetes, wants to see political leaders do more on student debt relief and make healthcare more affordable and accessible.

Workforce data from 2021 shows that 48% of frontline workers at Maximus — where Lewis, of Mississippi, is employed — are Black and Latina women.

Although Lewis said her pay is better under Biden than it was when Donald Trump was president, she said she still isn’t sure if she’s voting for Biden. Although like Garner, the Cleveland caregiver, she ruled out voting for Trump, she hasn’t ruled out voting for someone other than Biden.

Garner, who is civically engaged as a member organizer through One Fair Wage, a group that wants to end subminimum wages, said she wasn’t “leaning towards anybody just yet.”

Garner said that although she knows the courts have stopped Biden from moving forward with his more ambitious student debt cancellation plan, she wants to see him do more on the issue and other financial burdens she faces.

“Don’t tell me what you’re going to do. Show me what you’re going to do,” she said.

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NEW YORK CITY - JANUARY 05: People work in a donut shop in Manhattan on January 05, 2024 in New York City. As the American economy continues to outperform expectations, the December jobs report showed that employers added 216,000 positions for the month as the unemployment rate held at 3.7% (Photo by Spencer Platt/Getty Images)

The sturdy labor market continued to chug along in March, with an unemployment rate of 3.8%, marking the 26th straight month of an unemployment rate under 4%.

The economy added 303,00 jobs, according to the monthly report released by the Bureau of Labor Statistics on Friday. Economists, researchers, and policy experts say that the strong but no longer hot labor market should be encouraging news for the Fed as it decides whether to cut rates after a long campaign to fight inflation.

Aaron Sojourner, an economist and senior researcher at the W.E. Upjohn Institute for Employment Research, a nonprofit research organization headquartered in Kalamazoo, Michigan, said the labor market is “strong and healthy.”

“It’s remarkable that the economy added over 300,000 jobs at this point and job growth seems to be accelerating,” Sojourner said.

Which sectors are adding jobs?

Health care and government continued to add jobs in March, with the two sectors adding above their average monthly gains, at 72,000 and 71,000.

Elise Gould, senior economist at the Economic Policy Institute, an economic policy think tank based in Washington D.C., said government is a sector economists will be looking to to see more growth in education jobs. She added that public sector workers can fuel private sector employment growth as well.

For the first time, hospitality and leisure has returned to its pre-pandemic level after adding 49,000 jobs. Researchers and economists took this development as a good sign for the economy and for workers. Gould said it was a “great milestone” but also noted that many sectors have already hit that level and more.

Sojourner said it may be a good sign that it took this long for leisure and hospitality to return to this employment level.

“The fact that it didn’t immediately recover is in a sense, good news, because a lot of people found better opportunities outside the sector and employers had to raise wages and the quality of the jobs that they were offering in order to attract people back to the sector,” he said.

Construction also added about double the average of monthly jobs it added over the past year, at 39,000 jobs.

Skanda Amarnath, executive director of Employ America, a policy research and advocacy group with a headquarters in Washington D.C., said it’s hard to pinpoint exactly what drove that rise in jobs. The CHIPS and Science Act, the Inflation Reduction Act, and bipartisan infrastructure deal have supported employment in construction. Residential construction has been “reasonably robust,” he said. But these jobs could also be tied to a rise in hiring for construction in the spring months.

What do experts make of Black people’s rising unemployment rate?

The last four months of jobs data has shown an increase in Black people’s unemployment rate, from 5.2% in December to 6.4% in March. Black women’s unemployment rate was 5.6% compared to 4.4% last month and 4.1% a year ago. Black men had an unemployment rate of 6.2% versus 6.1% in February and 5.1% a year ago.

Gould said the uptick in the unemployment rate for Black people is concerning to her, because it has happened for a few months now, but not yet alarming because of the volatility in the data collected.

“I think that it’s something that we need to watch,” she said.

Sojourner agreed that while more data is necessary, it’s important to keep an eye on the unemployment rate for Black Americans, particularly if it’s an indication that Black people are having difficulty finding jobs rather than a sign of more people entering the labor market and looking for work.

He added that the effects of a recession tend to hit Black people before other groups.

“That’s very concerning because often you’ll see, Black Americans are on the leading edge … The recessionary stuff hits them first,” he said.

What does prime age employment tell us?

The prime age employment-population ratio, which measures the share of the working-age population, or 25- to 54-year-olds, who are employed, is also pretty high this month, at 80.7%. In April 2000, it reached an all-time high of 81.9%.

Amarnath said this is encouraging news.

“Right now we’re operating at levels that are especially high. Ideally, they can continue to move higher through the year, but these are levels that prior to the last 12 months we haven’t seen since I believe, more than 20 years ago …,” he said. “You think of [prime age employment] as being the best way of evaluating how many people are employed, adjusting for the aging of the population, adjusting for changes in participation.”

Are we seeing healthy wage growth? 

Wages have continued to outpace inflation, at an increase of 4.1% over the past year. In March, they rose 12 cents or 0.3%. The wage growth numbers, as well as the number of jobs added, show a steady job market but not one that is threatening the Federal Reserve’s attempts to bring down inflation, Gould said.

“When I look at those wage growth numbers, I think it’s pretty clear that is continuing to normalize very much in line with Fed targets as the inflation rate continues to come down. I think we’re in an economy that is getting where we wanted it to be and, I think, what the Fed is looking for as well. We’re seeing strong job growth, and that’s promising. More people are coming back into the labor force looking for opportunities,” she said.

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WASHINGTON, DC - JANUARY 31: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on January 31, 2024 in Washington, DC. The Federal Reserve announced today that interest rates will remain unchanged. (Photo by Anna Moneymaker/Getty Images)

The Federal Reserve declined Wednesday to cut interest rates, saying it remains uncertain inflation is slowing enough, but some economists warned the financial regulators risk waiting too long to make cuts.

Fed Chairman Jerome Powell said the Fed has a lack of sufficient data that inflation is slowing enough to justify taking the pressure off interest rates yet. The Fed started raising the federal funds rate in March 2022 to battle inflation and continued until the  latter half of last year, when it decided to pause rates.

The Fed issued a statement that it is waiting until it “has gained greater confidence” that inflation is moving toward its 2% goal to begin cutting rates.

The Fed’s preferred inflation indicator, the Personal Consumption Expenditures Price Index or PCE for short, rose 0.3% from December to January compared to 0.1% from November to December, which some economic experts say may be partly behind the decision to hold off on rate cuts. The PCE climbed 2.4% from a year ago compared to 5.4% from January 2022 to January 2023, an indication that inflation has been slowing in the long term.

Powell said, “We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”

He added that the Fed does not want to ease too much or too soon if that would risk a chance that inflation returns. Powell did not rule out pausing the rate for longer.

Skanda Amarnath, executive director of Employ America, an economic policy research group, and a former analyst at the New York Fed, said the Fed should avoid being too reactive to monthly inflation data, particularly in January and February, which have been hotter months for inflation in the past few years. A lot of businesses revise pricing with the new calendar year, Amarnath added, which can contribute to the rise.

Powell acknowledged on Wednesday that seasonal factors could have affected the data but that they didn’t add to the Fed’s confidence in slowing inflation either.

“Inflation is a volatile beast. Month to month, it can do weird things. But by and large, we’re seeing if you look at the year-over-year change in the [Consumer Price Index] and PCE, you’re broadly seeing progress,” he said.

The economy has also not shown signs of overheating for some time, Amarnath added.

“From everything we’re learning from the past, especially the last three to six months, it is a more normalized pace of job growth, a more normalized pace of wage growth … It’s largely moved in totality towards a still respectable and strong labor market,” he said.

Rakeen Mabud, chief economist and managing director of policy and research at the Groundwork Collaborative, an economic think tank, said she is worried that the Fed could wait too long to cut rates and damage the economy.

“All the Fed can do at this point is break this really strong recovery that we’ve had … I’m worried now because rate hikes are a really imprecise tool that acts with lags. I don’t know exactly when the full impact of these rate hikes are going to play out and neither does Jerome Powell,” she said.

Amarnath said that because Fed policy, although it is far from the only factor, has played a role in the past three recessions, the Fed should be careful with how it uses the federal funds rate in its campaign against inflation.

“You may not need to cut at this very meeting. But if you press your luck a little too long in terms of ‘OK, the economy is not collapsing right this second,’ and if you wait till something breaks, it may prove to be too late,” he said.

Americans say their top policy priority this year is strengthening the economy, according to a Pew Research Survey taken in January.

The Fed’s interest rate policies also affect housing supply and affordability. Mabud said that the Fed’s approach to meeting one of its stated goals — lowering prices — is helping to drive up housing costs, which in turn affects inflation measures. The Consumer Price Index, another inflation measure, shows that in February, shelter and gasoline were responsible for more than 60% of the index’s rise.

“Shelter costs continue to be a significant driver of inflation,” she said. “We’re seeing high mortgage rates which are driving up the cost of buying a house, which then pushes folks back into the potential rental market, which also pushes rents higher. The Fed’s high interest rate regime is also making constructing new houses more expensive. We have a shortage of 6.5 million homes, at least, in this country.”
The number of people recorded as unhoused on a single night rose to its highest level in January 2023, according to U.S. Department of Housing and Urban Development data released in December. The department attributed the rise in the number of unhoused people to the rental market, which has had high rent growth, and the ending of programs implemented early in the pandemic to keep people housed during an economic downturn.

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SAN RAFAEL, CALIFORNIA - FEBRUARY 07: A credit card decal is displayed on the window of a business on February 07, 2024 in San Rafael, California. According to a report by the Federal Reserve Bank of New York, credit card debt in the United States has reached $1.13 trillion. (Photo by Justin Sullivan/Getty Images)

You’ve probably heard of junk fees, as well as credit card late fees – the onerous banking fees you may incur as a credit card consumer.

But there’s a lesser-known factor that could be driving up your credit card costs and placing your household at risk of further debt, as total U.S.credit card balances now stand at a staggering $1.13 trillion – a record high.

This driver of high interest rates is known as the annual percentage rate margin – APR margin for short – and it is the additional interest credit card companies tack on beyond the prime rate. Banks use the prime rate, which is considered a stand-in for the cost of lending. So the APR margin is how credit card companies drive up their profits. Combined with the prime rate, this is your total credit card interest rate, known as the APR.

APR margin rates have reached an all-time high, according to the Consumer Financial Protection Bureau. The agency says this rise in the APR margin has contributed to roughly half of the swelling of credit card interest rates over the past decade.

The consumer watchdog agency says a deceptive credit card shopping process and lack of competition in consumer credit markets only exacerbates the problem.

On Feb. 29, the agency issued guidance to law enforcement and regulators on credit cards and other consumer products. The agency provided information on deceptive user experiences and potential anti-competitive business practices in the credit card industry. The bureau added that it is still working on a public-facing tool for consumers that would make it easier to compare credit card interest rates.

Between 2015 and 2022, the average APR margin increased 1.6 percentage points for someone with an excellent  credit score – 800 or above – despite no rise in late payments. The cost of an excess APR margin to the average credit card holder in 2023 totaled more than $250, the agency said.

One of the problems with this rise in APR margins is that it can “push consumers into persistent debt,” and possibly even delinquency, the brief stated. The Consumer Financial Protection Bureau defines “persistent debt” as charges for interest and fees that are more than half the payment amount within a year.

At the same time, consumers have been hit by changes in the federal funds rate, which is set by the Federal Reserve, and influences the prime rate used by banks, contributing to higher credit card rates. The Fed hiked interest rates starting in March 2022 and the central banking system began to hold rates steady late last year. Despite these changes, the watchdog agency says more attention should be paid to the rising APR margin.

“That margin is what’s been going up over the years. The CFPB says the interest rate on your credit card is going up, not because of the Fed rate, but because the margin that they slap on top of the index rate has been increasing over the years,” said Chi Chi Wu, senior attorney at the National Consumer Law Center.

In February 2022, consumers paid a 16.17% interest rate compared to November 2023, when they paid a 22.75% interest rate on credit cards, according to the Fed. In the last few months of 2023, delinquency rates increased 8.5% for credit card balances and rose for all age groups.

“This signals increased financial stress, especially among younger and lower-income households,” said Wilbert van der Klaauw, an economic research advisor at the New York Fed.

Part of the problem with these high interest rates is that consumers don’t have enough options, there is a lack of transparency on rates when shopping for credit cards, and current regulations aren’t up for the task of reining them in, Wu said. The Consumer Financial Protection Bureau also pointed to consolidation of the credit card market and less transparency from banks on interest rates when consumers shop. The top 10 issuers for credit cards make up more than four-fifths of credit card loans.

Wu said people also shop on rewards rather than on interest rates because consumers don’t have enough information on rates.

“Why do people shop on rewards? Is it just that they’re so much more valuable? Well, no. You can’t shop on interest rates,” she said. “You have to look at the credit card registration and you try to look at what the interest rate is.”

Banks may provide a range of interest rates or multiple possible rates but the consumer won’t know what the interest rate is going to be until after they have already applied because it will be based on their credit score, Wu explained. That allows banks to increase the rate to something as high as 28%, she said. Meanwhile, the credit card rewards are the least regulated aspects of credit cards.

Customers can’t rely on the law to stop banks from charging very high interest rates because there isn’t a limit on interest rates in the Credit Card Accountability Responsibility Disclosure (CARD) Act, a federal law passed in 2009. Many state laws don’t protect credit card consumers in this way either and companies are often chartered in states that don’t have strong usury caps or any usury caps, such as South Dakota and Delaware. These companies don’t have to follow the usury law of the state they’re doing business with customers in — only the state they’re chartered in, Wu explained.

“There’s no federal law that says you can’t charge above 36% which is sort of like the cap we think should be for all small loans,” Wu said.

A Senate bill, the Veterans and Consumers Fair Credit Act, which was introduced in 2021, would have implemented this consumer protection. Ultimately, it did not pass.

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MIAMI, FLORIDA - OCTOBER 02: Construction workers build a residential high rise on October 02, 2023 in Miami, Florida. According to the Census Bureau, apartment building starts fell to a seasonally adjusted annual rate of 334,000 units in August, marking a 41% decline from the pace seen the same month a year prior. (Photo by Joe Raedle/Getty Images)

Inflation is slowing and job growth has surged, but many Americans still feel the burden of expensive housing – fueled in part by high demand, low inventory and mortgage rates.

Home prices across the U.S. rose 5.5% over the past year in December 2023 and they are projected to increase 2.8% year over year by December 2024, according to CoreLogic, a consumer and business information company. None of the states in CoreLogic’s data showed home price declines.

Rents shot up 23.9% between the beginning of 2020 and the start of of 2023 and home prices rose 37.5% according to Harvard University’s Joint Center for Housing Studies’ 2023 state of the nation’s housing report. The median sales price of a home sold in the U.S. is $417,700, according to the St. Louis Fed.

Given the state of housing affordability in the U.S., here’s what to know about ongoing construction shortages, high interest rates, where housing prices are climbing, and what policymakers could do about it.

How did the housing market get this way?

Much of the current predicament renters and homebuyers face is linked to high housing demand, low housing inventory and the Fed’s cycle of hiking interest rates.

Very low mortgage rates – January 2021 saw the lowest recorded mortgage rate at 2.65% – fueled demand but drove up prices, exacerbated by low housing inventory, Matthew Walsh, economist at Moody’s Analytics explained. The Federal Reserve then raised interest rates in 2022 to combat inflation, which in turn influenced mortgage rates.

Those rates reached near 8% in October, and higher rates put constraints on housing supply, with more homeowners staying put. It’s now 6.77% for a 30-year fixed rate mortgage.

A lack of housing stock, both in for sale and overall inventory, is a key long-run problem for housing affordability, said Robert Dietz, chief economist for the National Association of Home Builders. A lack of accessible rental inventory that provides both single family and multi-family rental housing is a problem, he said.

“We simply don’t have enough developed land to build on, particularly in the places where it’s needed the most, which tends to be highly dense, more regulated markets in the largest metros where there’s a lot of population growth,” he said.

He added that a lack of  construction labor as well as expensive building materials – partly affected by supply chain problems – have exacerbated the problem.

A 2023 Home Builders Institute report found that construction would need to add hundreds of thousands of workers to meet residential construction demand. An HBI survey done in 2021 found that around 90% of home builders for single family homes said there was a shortage of carpenters and that more than 80% of remodelers said there was a shortage in most of the construction trades they needed subcontractors for.

What is the Federal Reserve doing with interest rates?

The Fed is expected to cut rates this year, which should have some impact on housing prices. The Fed may not cut rates until May or later, but economists have forecast multiple rate cuts this year.

Many homebuyers and renters are hoping that a cut in interest rates could provide lower home and rental prices, since a lack of homebuying can drive up rental costs.

But economists say there won’t be meaningful relief anytime soon.

“It should push mortgage rates down into the low 6% range and perhaps in 2025 moving into the high 5s,” Dietz said. “That’s not the 2 to 3% rate that we saw earlier, but it will help price in some demand by lowering the monthly payment on a hypothetical mortgage. It is going to have a disproportionate impact on first-time buyers who tend to be particularly sensitive to changes in rates because they don’t have any home equity as first-time buyers.”

Selma Hepp, chief economist at CoreLogic, said home prices will remain pricy for quite some time, even when mortgage rates come down.

“Because home prices have gone up 40%, no matter how much you adjust mortgage rates —  and we’re not expecting them to come down to 2% any time soon if ever again — you’d really have to get them to 2% to get that affordability back,” she said.

What are home price trends in different parts of the U.S.?

New Jersey, Connecticut and Rhode Island saw the highest home price increases in December, according to CoreLogic’s data, but no states saw home prices go down.

Hepp said that is significant because until this report, a couple states continued to show year-over-year declines: Utah and Idaho as well as the District of Columbia. She said that change may have been fueled by people moving from parts of California and from Seattle who drove up home prices in their new states.

A Moody’s Investor Service report released in October showed Florida, Montana, Nevada, and Idaho had the largest decline in affordability, due in part to growth in new residents.

But no part of the country is being spared by the effects of rising housing prices. Walsh said some of the fastest price appreciation he’s seen is in parts of the northeast and midwest because some of those markets are more affordable compared to parts of the country that saw an influx of residents earlier in the pandemic, such as metro areas in Mountain states including Colorado and Arizona

“The places where we’ve seen the most moderation in home prices have been in the places that lost that affordability edge…,” he said. “… Some of the fastest growing places in the northeast, like upstate New York, a place that really hasn’t seen quick increases in home prices in a long time, have been showing signs of life over the past year.”

How are policymakers helping?

Some states and cities are stepping up to the challenge of improving its affordable housing stock.

A program in Maine is funding more affordable rental housing, which includes the improvement of existing housing. Minnesota’s Family Homeless Prevention and Assistance Program is expanding rental assistance.

Voters in Phoenix and Albuquerque, New Mexico, last year supported bond measures that will spend millions on affordable housing. In 2022, voters approved housing bonds to fund more affordable housing for Buncombe County, North Carolina; Columbus, Ohio, and Kansas City, Missouri. Localities in Colorado and Montana voted to use tax revenues on affordable housing development and projects in 2023 as well.

On the federal level, the Biden administration announced in July it would address low housing supply by incentivizing projects with greater density and creating a program to fund projects that focus on zoning reforms. In October, the administration also introduced new housing initiatives to increase homeownership, such as loans to boost affordable housing on tribal lands and letting homeowners use prospective rental income from “dwelling units” at their home as part of their income when they want to qualify for FHA-insured mortgages. Some economists say that zoning is far too restrictive to increase housing supply and make it more affordable.

Government policies to address housing affordability should include “thinking about ways to incentivize state and local governments to reduce regulatory burdens and enact zoning reform to promote density where the market demands it,” Dietz said.

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WASHINGTON, DC - JANUARY 31: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on January 31, 2024 in Washington, DC. The Federal Reserve announced today that interest rates will remain unchanged. (Photo by Anna Moneymaker/Getty Images)

The Fed held key interest rates steady again Wednesday, as expected, and signaled that a decision that could affect everything from credit card rates to the housing market to new business creation could still be months away.

It was the fourth consecutive time the central bank has left the rate unchanged since its September 2023 announcement. In March 2022, the Fed began aggressively raising rates to stop ballooning inflation.

Following the announcement, Federal Reserve Chair Jerome Powell said that confidence is growing that inflation is coming down to meet the Fed’s target of 2%, it needs to see more data to decide to cut rates, particularly in the 12-month core inflation data.

But Powell said its confidence likely won’t be strong enough to cut rates by March as many economists believed would happen, meaning it could be May before a decision is made to cut rates.

“I think to get to that place where we feel comfortable starting the process we need some confirmation that inflation is in fact coming down, sustainably to 2%,” Powell said.

Powell added that serious changes to the labor market would affect the Fed’s decisions about when to cut rates.

“If we saw an unexpected weakening certainly in the labor market, that would weigh on cutting sooner,” he said. “And if we saw inflation being stickier or higher, or those sorts of things, we’d argue for moving later.”

The decision to hold rates steady was in line with economists’ expectations for the meeting. The issue of when to stop increasing rates and when to begin cutting rates, to avoid harming the economy and cause high unemployment, has been a matter of intense debate among economists and policymakers during this latest cycle of rate hikes. Over the past six months, core inflation or the Personal Consumption Expenditures price index is 1.9%, leading some economists to argue that it’s time to begin cutting rates.

Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute, a progressive think tank, said it would make sense for the Fed to begin cutting rates soon.

“[A cut] is appropriate given how much inflation has fallen, both faster and in a more broad way than the Federal Reserve thought even six or nine months ago,” Konczal said. “The Fed is targeting a level of inflation that is just not the reality right now in the economy.”

The Federal Reserve has a pivotal decision to make in the coming months — when to start cutting interest rates after an aggressive campaign of rate hikes to combat inflation. Some economists worry that if the Fed doesn’t cut rates soon enough, now that the rise in core inflation over the past six months is in line with the Fed’s 2% inflation target, it could damage the labor market and send ripples through the economy.

There is some risk to waiting too long to cut rates, Konczal said. Although the economy is adding jobs and decent wage growth continues, he’s looking for signs of cracks underneath the surface of an otherwise stable labor market. He said that the rate for people leaving their jobs and being hired for new ones has slowed.

If the Fed waits too long to change course, he said there could be some danger of the unemployment rate ticking up too fast.

“Once those things start to fall, they fall very quickly,” he said.

Several Democratic senators have urged the Fed to begin cutting rates, arguing that it could hurt the economy not to do so as soon as possible, a reminder that the economy will be a big issue in the fall elections. Sen. Sherrod Brown (D-OH) , chair of the Senate Committee on Banking, Housing, and Urban Affairs advocated for Powell to lower rates in a letter addressed to the chairman this week.

Brown wrote his own letter, which highlighted the struggles of Ohioans he said are not able to rent or buy homes, a problem he said has been exacerbated by higher interest rates.

“I hear from so many Ohioans that they feel trapped – those who rent feel like they’ll never be able to afford to buy and those who already own their homes feel like they will never be able to afford a larger one if they decide to grow their family,” Brown wrote.

Sometime after the Fed cuts rates, Americans can expect to see relief in the housing market, where homeowners have struggled with low housing supply and high prices, and high demand for rentals that has also pushed up rental prices.

“The first place where we see the reaction in the economy is the housing market and is in those mortgage applications, like some refinancing, for example,” Lara Rhame, chief U.S. economist and managing director of FS Investments. “The other places we see it are things like auto sales, which are very interest-rate sensitive. It’s worth noting that credit card interest payments have really increased, but that doesn’t move until the Fed actually cuts rates. That’s a shorter term interest rate, but when the Fed cuts, that will start to come down a little bit.”

William Hauk, associate professor of economics at the University of South Carolina, said it could take a while for the average person to feel a shift in the economy as a result of Fed policy changes.

“How quickly this translates into changes for the rest of the economy is a matter of some debate. Making it easier for people and firms to borrow and/or refinance loans does typically have a positive impact on economic demand,” he said. “And people spending money is good for keeping the economy out of recession. However, this effect typically hits the broader economy with a lag, perhaps as long as 12 to 18 months.”

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HINES, ILLINOIS - NOVEMBER 10: Prosthetist Erik Lindholm adjusts a prosthetic leg for Karl Sowa, a 75-year-old U.S. Army veteran, at Edward Hines Jr. VA Hospital on November 10, 2021 in Hines, Illinois. Sowa, who lost his leg due to an infection in 2018, was being fitted for a prosthetic leg with a power knee manufactured by Ossur, an Iceland-based manufacturer. Still in beta testing, the leg features the world's first motor-powered microprocessor prosthetic knee that uses artificial intelligence (AI) to learn human movement patterns and assist with those movements. (Photo by Scott Olson/Getty Images)

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RICHMOND, CALIFORNIA - MARCH 13: A Costco customer stands by his two shopping carts at a Costco store on March 13, 2020 in Richmond, California. Some Americans are stocking up on food, toilet paper, water and other items after the World Health Organization (WHO) declared Coronavirus (COVID-19) a pandemic. (Photo by Justin Sullivan/Getty Images)

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