Three questions with Federal Reserve executive Nicholas Sly

New Mexico has “definitely been one of the states that has faster than the national average growth in housing costs,” according to Nicholas Sly, a Denver branch executive and economist with the Federal Reserve Bank of Kansas City.

“Rents as well grew very, very quickly in the northern part of the state,” Sly added, whose job entails staying on top of economic conditions in Colorado, Wyoming and northern New Mexico.

Sly is in town to meet with business leaders to gauge how the local economy is doing and where it’s heading. He sat down with the Journal on Tuesday, discussing everything from the Federal Reserve’s outlook on interest rate cuts this year to how Trump’s policy proposals might affect local businesses.

This interview has been edited and condensed for clarity.

What issues are being brought up locally by business owners and leaders?

What we’re hearing is, a lot. One of the things that I would highlight is that there’s still a fair amount of optimism coming in. … For the most part, what we’re hearing is (businesses are) continuing with 2025 capital expenditure plans — moderate expansion and business investment — continuing with their 2025 hiring plans, which is just slight or stable employment growth, (and) expecting sales to remain somewhat firm. In that sense, they’re saying that our plans largely have not changed.

I will note that we’re starting to hear a little bit from folks that there have been some delays, though, in the sense of maybe purchasing equipment (being) delayed a couple months until they see a little bit more stability, or some delays in hiring plans until you see a little bit more clarity about the outlook.

What type of pressure could Trump’s policy proposals (like regarding tariffs or immigration) put on inflation?

There’s a host of different adjustments, and some can have price-level movements. Some can potentially be inflationary. Some of them can be temporarily disinflationary in some regards. And so you have to take them in totality.

One thing we’ve been paying attention to in talking to some developers when it comes to housing is key inputs and materials for housing — things like lumber, things like copper wiring and other materials. You look at those materials costs and you start to ask the question: “How are developers accounting for that?”

We do see a couple of things where actions are already being taken, like running up inventory. … We’re asking questions (to) business leaders, “Is this deterring projects, or is it changing your strategy?” We’re hearing some things that, for the most part, it’s causing developers to take a hard look at some of their project plans, or even the commitments they might get from their vendors, so they don’t get caught by some of that potential price growth, but at the same time, still going ahead with a number of the of those development projects.

We’re seeing business leaders (be) very attentive to it, but it so far, hasn’t derailed as much of the development plans for this year. I think we need to continue to ask this question over time to see the effects.

What do you tell people here in New Mexico who are banking on potential decreases in rates for mortgages and car loans?

Well, the first thing is, when those conversations come up: listen. These are real hardships. If you’re on the side of needing a new mortgage or needing a new car loan, those are real challenges. …

At the end of the day, higher interest rates for a shorter period of time — having them in a restrictive stance — is a hardship for folks that need to borrow. But higher inflation — meaning shelter costs, food costs, clothing, health services and everything else — is a hardship for every American household that you don’t want to let run away. That’s the story: You hope you can move inflation back down to 2% as quickly as possible.