For the first time in four years, the Federal Reserve is cutting its benchmark lending rate.

The central bank began raising this rate in order to fight high inflation.

And for more than a year, that rate has sat at a 23-year high.

So what does this mean for Nevada's housing market and for Nevada consumers?

For that, we welcome John Restrepo, Principal of RCG Economics.

And, John, the Federal Reserve is cutting this rate by a half point.

Some economists thought it would be by just a quarter point.

What do you make of this?

(John Restrepo) I think there are two things that the federal, the Federal Chairman, Jerome Powell, said today: The inflation, the reduction in inflation, is on a steady downward path.

So they felt comfortable, okay, isn't that superheated.

we're going in the right direction, number one.

And number two, the job market is healthy, and they want to maintain it healthy, so they're trying to calibrate the rates-- the interest rate to a lower rate of inflation and to a steady job market.

-So what do you make of the timing, though?

There were supposed to be cuts earlier this year.

-I think at this point, I think the Fed saw the significant drop-off in the job growth numbers at the national level.

Not that jobs are declining, it's just the number of jobs produced has slowed down and the rate of inflation has now been sustained at a lower rate for enough time to go, Okay, we can-- we feel comfortable maintaining these trends, and let's do this 50 basis point increase, which, as you mentioned I think earlier, they haven't done it in about four years.

So it's a pretty big, pretty big change, but it's probably one that I think the Fed needed to do to make sure things stay stable.

-Nevada is in a housing crisis.

Supply just does not meet the demand.

How does this cut impact that?

-Well, as we were kind of discussing a little bit earlier, and that is, it's going to create additional demand, potentially, particularly if there's another quarter point to 50 basis point increase before the end of the year.

So if there's two more meetings, I think two or three-- two more meetings of the Fed, and they could increase it either 225 basis point increases or 125, 150.

And that would increase demand for housing, because interest rates will lower mortgage rates.

The challenge around for us, and not only here, but around the countries, is the problem hasn't been necessarily high interest rates causing housing prices to not be in demand.

It's a shortage of housing.

So there had been just a supply constraint market that's caused by a variety of factors.

And so it could have weird situation where the increase in interest rates could create mortgage demand and increase the demand for housing, as opposed to reducing housing price.

-And I think we have already seen that starting to happen across the country.

-Correct.

-Just because the rate is cut does not mean that more homes are going to be magically created.

Right.

Well, so what about for someone who has been waiting to get a home loan or to refinance their home loan?

Do they do that now or wait for further cuts?

-Wait.

Wait for further cuts.

Wait to see what happens.

April, May of next year.

We have time.

Let's not rush into anything.

You know, that big purchase is like including cars and other things like that.

So wait.

Rushing usually-- when you rush, usually you make a bad decision.

Things are going to change over time.

Let's see how it all unfolds.

-I'm glad you brought up cars, though, because this will apply to car loans as well.

-That's correct.

-What about credit cards?

-Credit card debt is a little different.

We do have excessive amounts of credit card debt right now because, you know, there's one thing Americans agree on, whether they're conservatives or liberals, is buying things on credit.

We, you know, we're not a society that lives within their means necessarily.

And so credit card debt, it'll be a little bit of adjustment, but they're so high as it is now, I don't think it'll make a big, big difference.

You'll notice a difference if you start seeing a greater volume of credit card offers in the mail to your house.

-Aha.

-If you see that kind of pattern in mail delivery, then you know something's going on.

I don't think it's going to have much impact on credit card debt or interest rates.

-You talked about the labor market nationally.

How would you describe Nevada's labor market right now?

And are you concerned that the slowing, the cooling of the labor market will impact Nevada?

-No, not yet.

Remember, the health of our economy and the health of our job market is really driven by the health of the economy in the rest of this country and internationally, because we're basically a tourist destination.

And so as long as that stays healthy, we'll do fine.

I think we'll do fine.

I think the bigger issue for Southern Nevada is we still have a lot of low-wage workers, so the cost of living versus wages is kind of out of sync compared to the U.S. as a whole.

To me, the bigger concern for the job market, at least in the intermediate term, let's say the next 5 to 10 years, as far as anyone knows what's going to happen 10 years from now, is a question of AI, automation, robotics, and what that does to our labor market and what kind of displacement, at least initially, will occur with people losing their jobs because of AI.

-Are there particular sectors you're concerned about?

-The resort industry.

On most of the economic surveys, our research on this, the hospitality industry around the country is the one that's been affected the most by AI or automation, robotics, however you want to call it.

And it looks like it will be the same one over the longer term, so I'm concerned about that.

-Yeah.

Hence why the culinary union has gotten some of those AI protections.

-That's correct.

-The Nevada consumer, when might they feel that inflation truly is lowered?

-You know, the question is how you define "inflation," right?

Folks understand that the rate of inflation or the rate of price increases is slowing, which is good, but they're still pretty high at the pump.

-Right.

-Or at the store.

So until you see prices actually coming down, the price of food, the price of fuel, you know, those are the two most volatile things, then you kind of understand intellectually, okay, the rate of increase is not getting worse.

In other words, what I paid for gas six months ago is the same.

So it's not getting worse, but it's not getting better.

So that we don't know.

-Will it ever get back to prior to when inflation reached its peak?

-Prior to the 2019, 2020 levels?

Probably not.

-Yeah.

-Prices get set, you know, and they kind of stay steady.

Very rarely do prices drop that dramatically.

It's got to be a really bad recession.

Now, that would-- you could see a lot of-- you could see a pretty significant price decrease on products and services if you have a deep recession, but you don't want that.

You'd rather have elevated prices and a healthy economy and healthy people with jobs, as opposed to a high unemployment rate but lower prices.

Pick your poison.

-We always have to ask you, what are your thoughts on a possible recession?

-I don't think we're going to see that anytime soon.

I think there's going to be a slowing in the economy.

I think the markets are indicating that--when I say "the markets," the general market, not the stock market, necessarily--that recession is not likely.

There will be a cooling off to the economy.

Remember, we're at a 5%, little over 5% unemployment rate in Nevada.

That used to be considered good, healthy.

A healthy economy was 5%.

That's what all the economists were taught.

That's what I was taught when I was in school.

We now have had a period where we've had very low unemployment.

So to go to 5% we think is a catastrophe.

It really isn't, because you need some excess number of people in the job market, I mean, to fill new jobs that come into play.

And so I don't see-- I don't see a recession.

I see a cooling off.

-Okay.

The Federal Reserve Chairman, Jerome Powell, at the press conference following this announcement of the decision said this is his fourth Presidential election that he's been in the Fed during, during this time frame.

The Fed operates independently from the government; however, there could be an impact on the election.

Or that's my question for you: Do you think this decision will impact the election?

-No.

-Why not?

-Because it takes time for an interest rate cut like this to really flow through the economy and see the effects of it.

So we don't know who it'll benefit at this point.

And so even if, regardless of who benefits from it, either candidate Vice President Harris or former President Trump, it's going to take time to see the economic effects on Main Street, so to speak, for the average consumer, to say, Ah, because they did this, that helped.

It's going to take time.

So we only have, what, 40, 50 days to the election?

It's not enough time to make a difference at this point.

-Is there anything to be taken from the fact that former President Trump appointed Jerome Powell and President Biden kept him in place?

-No, because the Fed is independent, and that's the greatest strength of having an independent central bank.

I think Chairman Powell said it really well earlier today in the press conference: All countries that have an independent central bank have the most stable democracies, have the most stable economies.

The last thing you want to do is have politics involved in the Federal Reserve or central bank decisions.

And so as long as we keep that independence, regardless who gets, who appoints who, I think it's the best way to stay.

John Restrepo, RCG Economics, thank you for joining Nevada Week.

-Thank you, Amber.

Appreciate it.