Measured Hawkishness as Fed Hikes Rates in July
The Federal Reserve’s monetary policy committee increased the federal funds rate to a top target of 5.5% at the conclusion of its July meeting this week. The Fed will also continue to reduce its balance sheet holdings of Treasuries and mortgage-backed securities as part of quantitative tightening. These actions are intended to slow the economy and bring inflation back to 2%.
After a June pause, the July increase is consistent with a measured hawkishness for the central bank.
The Fed indicated: “In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
This suggests a bias toward additional tightening but under a data-dependent approach with respect to future inflation reports.
The Fed faces competing risks: elevated but trending lower inflation combined with ongoing risks to the banking system and macroeconomic slowing. Chair Powell has previously noted that near-term uncertainty is high due to these risks. Nonetheless, economic data is solid.
The Fed stated on Wednesday: “…economic activity has been expanding at a moderate pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. The U.S. banking system is sound and resilient.”
Looking forward by looking back, the Fed’s June projections indicated perhaps two more rate hikes were in store in the coming months. One happened here in July. It seems reasonable under a “measured hawkish” approach, a skip could happen in September and a final rate hike at the end of October. Or a final rate hike in September could occur with no skip if additional progress is not made on CPI in the next report.
NAHB Chief Economist Rob Dietz provides additional analysis in this Eye on Housing blog post.
Latest from NAHBNow
Oct 03, 2025
NAHB Awards Deadline Extended to Oct. 20Interested applicants for NAHB’s prestigious award programs now have additional time to submit top projects and individuals for consideration. Don't miss your chance - apply by Monday, Oct. 20.
Oct 03, 2025
Fast Money, Fewer HeadachesEvery week lost to underwriting is a week you’re not building, selling, or scaling. Delays push projects out of prime seasons, tighten cash flow, and leave crews idle. And when banks already move at their own pace, builders who aren’t prepared can get stuck at the back of the line.
Latest Economic News
Oct 03, 2025
Supply-Side Cost Pressures Drove Housing as Inflation Leader in 2024Though the rate of inflation peaked in June 2022, consumer prices continued to increase throughout 2023 and 2024 as inflation drove further price growth, according to 2024 CPI review from the Bureau of Labor Statistics.
Oct 02, 2025
Square Foot Prices Moderate in 2024Median square foot prices for new single-family detached (SFD) homes started in 2024 grew modestly, according to NAHB’s analysis of the latest Survey of Construction (SOC) data. For custom, or contractor-built, homes, the median price was $166 per square foot of floor space, up slightly from $162 in 2023.
Oct 02, 2025
17% of NAHB Builders Built Age-Restricted Housing in 2024Only 17% of NAHB builder members build age-restricted housing for people age 55 or older, according to 2024 Member Census. This is up two percentage points from the previous year. However, this share has remained within a narrow band (15%-17%) since the question was added to the member census in 2009.