Federal Reserve Bank Chairman Jerome Powell said he doesn't anticipate a reduction in the central bank rate in March and that decisions about rate cuts will be made on a month-to-month basis.
“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen,” Powell said.
He said restoring price stability is "essential to achieve a sustained period of strong labor market conditions that benefit all."
At the same time he expressed increasing confidence among himself and fellow policymakers that inflation is progressing toward their 2% target. However, he emphasized the importance of gathering additional evidence before confirming this achievement, acknowledging that the decision to initiate the gradual reduction of elevated interest rates is of significant consequence.
"We want to ensure the precision of this step," he said.
Earlier this week, four Democratic Senators sent him a letter to express their concern over the detrimental effects of high interest rates, which caused mortgage rates to reach a 20-year high last October. According to the senators, these rates have become a major roadblock, pushing the dream of affordable housing out of reach for countless individuals and families.
"The Fed’s decision to raise interest rates rapidly, and keep them high, has resulted in higher costs for home purchasers, higher rents, and reductions in new home and apartment building—and the job growth that comes with these investments," the senators wrote.
Powell made clear that the Fed's policy mandate doesn't require him or the committee to concern themselves with housing or mortgage rates. At the same time, he acknowledged that rental data is baked into Personal Consumption Expenditure data and there's relief on the horizon for renters.
"We think that's coming and we know that's coming. It's just a question of when," Powell said.
Mortgage Bankers Association Chief Economist Mike Fratantoni said the statement regarding the Fed reducing its portfolio was welcome news.
“The statement also indicated that the Fed expects to continue trimming its balance sheet, allowing for the same pace of passive runoff of their Treasury and MBS holdings. This is despite the fact that some Fed officials have recently indicated a desire to begin to slow the pace of runoff," Fratantoni said. “The combination of strong consumer demand and somewhat lower mortgage rates should support a more robust spring housing market this year.”
As for overall inflation, Powell wasn’t ready to declare that the Fed has pulled off an elusive “soft landing."
“We still have a ways to go," he said.
For now, the Fed left its rate unchanged, at 5.25 and 5.5%.
