Jerome Powell On Housing: June 11-12 FOMC Meeting
Read My June 14th Newsletter
At the FOMC press conference on June 12, 2024, Jerome Powell gave an opening statement and answered questions from reporters.
The Federal Reserve decided to maintain the current federal funds rate rate and signaled only one rate cut by the end of 2024, down from the three cuts previously suggested. Despite inflation easing slightly, it remains high enough to raise concerns about long-term stability, though the Fed did note the recent progress toward their 2% goal.
The Fed’s updated “dot plot” indicates a general leaning toward a more aggressive rate-cutting path in 2025, given the right conditions, with a projected federal funds rate of 4.1% by the year’s end.
Keep reading for the direct timestamps and transcripts for every time Powell mentioned housing during the press conference.
And be sure to tune into today’s Hot Sheet, where Byron Lazine broke it all down.
COMMENTS ON HOUSING FROM POWELL’S OPENING STATEMENT
Fed Chair Jerome Powell’s opening statement only mentioned housing once—listing it among the essentials consumers are finding less affordable. He reiterates the motives behind the Fed’s monetary policy decisions.
04:22 – “My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power especially for those least able to meet the higher costs of essentials like food, housing and transportation.
“Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. In support of these goals, the committee decided at today’s meeting to maintain the target range for the federal funds rate at 5.25% to 5.5% and to continue reducing our securities holdings.”
HOUSING-RELATED COMMENTS FROM Q&A SEGMENT
27:26 – FOLLOW-UP QUESTION FROM MICHAEL MCKEE, BLOOMBERG RADIO AND TELEVISION:
“Is there any kind of concern for the housing Industry or financial stability/banks in leaving rates where they are for too long at this point?”
Jerome Powell:
“You know the housing situation is a complicated one and you can see that’s a place where rates are really having a significant effect. Ultimately the best thing we can do for the housing market is to bring inflation down so that we can bring rates down so that the housing market can continue to normalize. There will still be a national housing shortage as there was before the pandemic. There will still be one, but the distortions that we see now with lock-ins and things like that, you know, low mortgages.
“In terms of banks, the banking system has been solid, strong, well capitalized…. We’ve seen good performance by the banks. We had the turmoil early last year but banks have been focusing on bringing up their liquidity, bringing up their capital and having risk management plans in place. So, the banking system seems to be in good shape.”
28:36 – QUESTION FROM CHRISTOPHER RUGABER, ASSOCIATED PRESS:
“I was wondering if, on inflation, if you can tell us a little more about where you see inflationary pressure in the economy. You mentioned labor markets coming into better balance and inflation expectations appear to be well anchored. You’re seeing, you know, anecdotal stories of the large chains like Walmart and Target are announcing price cuts, McDonald’s announcing a $5 meal deal. So, you know, people may still be unhappy about prices at the grocery store, but it doesn’t seem like there’s a lot of inflationary pressure left in this economy. I wonder if you could tell us more about that.”
Jerome Powell:
“I think that’s true that inflationary pressures have come down. But we’re still getting high inflation readings…and I think you can see it in various places…in some parts of non-housing services, you see elevated inflation still. And that could be to do with wages. Goods prices have kind of fluctuated. There’s been a surprising increase in import prices on goods, which is kind of hard to understand. And we’ve taken some signal from that…and of course housing services you’re continuing to see high readings there. To some extent, that’s catch-up inflation from earlier pressures but…overall you’re right. Inflationary pressures have come down.
“As I mentioned, the labor market has come into better balance. Wages are still running you know I would say above a sustainable path which would be that of trend inflation and trend productivity. You’re still seeing wage increases moving above that. We haven’t thought of wages as being the principal cause of inflation, but at the same time getting back to 2% inflation is likely to require a return to a more sustainable level, which is somewhat below the current level of increases in the aggregate.”
49:48 – QUESTION FROM NANCY MARSHALL-GENZER, MARKETPLACE:
“Just one more question on housing: Can you still cut rates with shelter prices high or will you wait until they start to moderate?”
Jerome Powell:
“There isn’t any one variable like housing prices moderating that would really decide or decide against what we’re doing. We’ve got an overall test which is greater confidence that inflation is moving down to 2% on a sustainable basis. That’s our overall test. Or, alternatively, we see unexpected weakening in the labor market. So those are two different tests…. We’re not looking at any one price in any one sector and saying that’s the one. We don’t target housing prices for example. And we don’t target wages. We target aggregate prices and overall employment.”
50:49 – FOLLOW-UP QUESTION FROM NANCY MARSHALL-GENZER, MARKETPLACE:
“But if housing prices remain sticky could that slow down the pace of rate cuts?”
Jerome Powell:
“We’d be looking at the aggregate numbers and asking ourselves what’s going on here at the aggregate level… And of course, if any price that contributed to ongoing inflation would matter, any price that contributed to ongoing disinflation would matter too. But I wouldn’t single out housing as having a special role there.”
https://nowbam.com/jerome-powell-on-housing-june-11-12-fomc-meeting/
Posted by Sarah Lentz | Jun 13, 2024 | RE News
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