U.S. Senator Raphael Warnock, Democrat of Georgia, used his time during today’s U.S. Senate Committee on Banking, Housing and Urban Affairs hearing on monetary policy to tie the problem of affordable housing in Georgia to Federal Reserve System rate setting.
Jerome Powell, chairman of the Board of Governors of the Federal Reserve System pointed out that the Board and its rate setting committee, the Federal Open Market Committee, do not target specific sectors, industries, or states when setting policy. Chairman Powell did note in his testimony that the FOMC has observed moderate growth in capital spending and an increase in residential investment.
In his testimony, Chairman Powell reminded the committee that the FOMC has held the fed funds rate in the target range of 5.25%-5.50%. The FOMC may not consider decreasing the target range until it has confidence that inflation is moving closer to the inflation target range of two percent. The FOMC will keep its eyes out for the “good data” that signals the need for a decrease in rates.
Why was I surprised today by Senator Warnock’s question? Unfortunately, too many senators in the progressive camp tend to treat the Federal Reserve System as a social welfare institution or agency, seeking to expand the dual mandate of maximum employment and stable prices into an “agent for change” whether in terms of climate change or filling vacant federal reserve bank board seats with members of the ethnic minority community.
As the Federal Reserve is viewed as an operational extension of the Congress, I can understand why some senators and congressmen wish that the Fed could help do the “people’s business” by implementing social policy.
My eyes would have rolled had Senator Warnock asked a question implying that the Fed use monetary policy to directly drive down mortgage rates. Fortunately, I got the impression the Senator tried to tie the reality of monetary policy to the reality of the affordable housing question.
Alton Drew
9 July 2024
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