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Chair Powell Questioned On US Housing Supply

FED
  • Q: How much of the effort to tame inflation hinges on housing supply? How is constrained housing supply (with homeowners locked into low interest mortgages) going to impact future thinking about taking interest rates so low in the future?
    • A: Supply is important over time in setting house prices and rents. Supply is kind of structurally constrained, but for near-term inflation a lot of it is leases that are running off and resigned at a level that won't be that much higher; a year ago it would have been much higher than a year before, now it may be below or at the same level. We expect measured housing services inflation coming down.
    • The idea that people are in very low rate mortgages: I don't think that it would affect future decisions of whether we would cut rates. I think we would be looking at what rates does the economy need.
  • Q: Would the Fed welcome a decrease in consumer spending? Would you worry that would contribute to an econ slowdown or recession?
    • A: We are not looking for a decrease in consumer spending. It's a good thing the economy is strong. The only concern is that if the economy comes in stronger than expected we will have to do more in terms of monetary policy to get back to 2%.
    • Concern number 1 is restoring price stability. We have the ability to be careful as we move forward.
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