Multiple reporters questioned Federal Reserve Chairman Jerome Powell during a Wednesday press conference over the decision to keep interest rates steady.
The Fed announced that interest rates would remain steady, despite second-quarter GDP growth of 3% and lobbying from President Donald Trump. Reporters from the Wall Street Journal and Fox Business Network questioned Powell about why he wasn’t lowering interest rates, with Fox Business reporter Ed Lawrence pointing out the effects on would-be homebuyers. (RELATED: CNBC’s Rick Santelli Touts ‘Better Than Expected’ GDP Numbers Under Trump)
“How do you justify to someone looking for a house, facing a 7% mortgage, and maybe can’t afford those rates?” Lawrence asked Powell. “How do you justify that?”
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“Housing is a special case, right? We don’t set mortgage rates at the Fed. We set an overnight rate. The rates that go into mortgages are longer-term rates, like Treasury rates, might be 30-year rates … Something we don’t have any effect, we have do an effect but not we’re not the main effect,” Powell claimed. “There are other things going on in the housing sector and one of those is a long-term housing shortage that we have. We haven’t built enough housing, this is not something the Fed can help with, and that will be the case after things normalize. So, I think the best thing we can do for housing is to have 2% inflation and maximum employment and that’s what we can contribute to housing.”
Trump and Powell have reportedly clashed over the Fed’s failure to lower interest rates, with Trump nicknaming Powell “Too Late” over the Fed chairman’s refusal to cut rates.
Two members of the Federal Open Market Committee (FOMC), Fed Governors Michelle Bowman and Christopher Waller, dissented from keeping rates steady, arguing for the equivalent of a .25% cut in the first double dissent since 1993, Fox Business reported. Both Bowman and Waller are listed as potential replacements for Powell in a June 30 article by The Hill.
Lawrence and Wall Street Journal Chief Economic Correspondent Nick Timiraos also questioned Powell about tariffs imposed by Trump earlier in the year. (RELATED: Hard-Hat Clad Jerome Powell Visibly Shakes His Head At Trump During Fed Building Tour)
“What have you learned over the last few months about the inflation-generating and price pass-through process and just to drill down, the June CPI report showed evidence of tariff-induced goods inflation. Now, the tariff landscape is only starting to be settled with some of these more recent deals. Given the lags between when tariffs are announced and when they show up in goods prices, is two months a long enough horizon to evaluate the impact and be confident that tariffs aren’t impacting the broader inflation process?” Timiraos asked.
“I think you have to think of this as still quite early days and so I think what we’re seeing now is substantial amounts of tariff revenue being collected, on the order of 30 billion a month, which is substantially higher than before and the evidence seems to be mostly not paid, but paid only to a small extent, through exporters lowering their price and companies or retailers, sort of people upstream, institutions that are upstream from the consumer are paying most of this for now,” Powell responded.
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