BOE: Highlights from the MNI Connect webcast with BOE's Alan Taylor (2/2)

In response to the first question from the Senate banking committee about addressing affordability concerns in the economy, Fed Chair nominee Warsh calls for a new Fed inflation framework as part of a broader suite of reforms. 

• He says that "over the course of the last several years, prices went up to the tune of 25-35% for virtually all deciles of the American people...that's an indication that the Fed missed its mark, and we are still dealing with the legacy of the policy errors in 2021 and 2022...once you let inflation take hold in the economy, it's more expensive and harder to bring it down. And so the fatal policy error going back four or five years is still a legacy that we're dealing with we need in my judgment, fundamental policy reforms to fix it. And while it's true that inflation is less problematic, meaning the rate of change in prices is less severe than it was some years ago, hard working Americans are no doubt feeling it, I think that means a regime change in the conduct of policy. I think that means a different, new inflation framework"
• He adds: "The Fed has an interest rate tool and a balance sheet tool. My view is, the interest rate tool gets in the cracks. It's fairer. The balance sheet tool disproportionately helps those with financial assets, the interest rate tool, hits the entire economy. So we need a new framework, new tools and I'd also say, Mr. Chairman, new communications"

• EUR/USD: $1.1580-85(E906mln), $1.1750-70(E2.9bln), $1.1800-05(E1.5bln), $1.1850(E2.9bln)
• GBP/USD: $1.3250(Gbp777mln)
• USD/JPY: Y158.00($867mln), Y158.35($573mln), Y158.70($527mln), Y160.00($626mln)
• AUD/USD: $0.6670(A$1.5bln)
• NZD/USD: $0.5560(N$1.1bln)

Pending home sales showed a little more resilience than expected in March, picking up 1.5% M/M (0.5% expected) after 2.5% in February (rev from 1.8%). While this still leaves pending sales levels below the November 2025 pace, it at least means that the 8+% plunge over December and January to all-time lows probably marked the nadir for now. 

• Sales picked up in 2 of 4 regions (Northeast +4.4%, rebounding after 2 big drops, and South +3.9%), with declines in the Midwest (-1.3%) and West (-2.6%) after two months of growth. The report made particular note about prospects for renewed strength in the South after price drops and continued emplohment resilience.
• This is a leading indicator for existing home sales, which have duly stalled kin 2026 so far with drops in January and March to a 9-month low. Pending sales holding up in the face of a rebound in mortgage rates alongside the Middle East War-induced energy price shock, though overall activity remains very weak.
• The NAR's Chief Economist Lawrence Yun acknowledged this resilience amid a tightening in financing, citing pent-up demand; we note also that months of existing home supply in terms of monthly sales rose to a 4-month high 4.1 in March: "Contract signings rose in March despite higher mortgage rates, pointing to pent-up housing demand. A greater supply of inventory will help translate that demand into more home sales.”