WASHINGTON -- The Latest on Federal Reserve Chairman Jerome Powell's presentation of the Fed's semi-annual monetary report to the Senate Banking Committee. (all times local):
Federal Reserve Chairman Jerome Powell says homebuilders are having a harder time building lower-cost housing because of higher tariffs and tougher immigration policies.
"The homebuilders feel like they've been hit by a perfect storm here," Powell tells the Senate Banking Committee in his second day of testimony before Congress.
Higher tariffs have increased costs for construction materials, he says, and tighter immigration enforcement has made it harder for builders to find workers. Even though the Fed has kept rates low and mortgage rates have fallen, those factors have pushed developers to build higher-priced homes to cover the bigger costs.
Powell, under questioning from Sen. John Kennedy, Republican of Louisiana, says legal and illegal immigration can help the U.S. economy by increasing the size of the workforce. When asked whether illegal immigration lowers US wages, Powell said that extensive research on the subject "has not reached a clear conclusion."
Powell says before the Senate Banking Committee that very low unemployment rates no longer necessarily push up inflation. A relationship between the two existed "50 years ago" but that has gotten "weaker and weaker and weaker," Powell said.
Powell's comments in a second day of testimony on Capitol Hill suggest the Fed is more comfortable keeping short-term interest rates low and suggests that Fed policymakers may cut rates at its meeting later this month. For decades, economists assumed that low unemployment — such as the current jobless rate of 3.7% — meant that employers would have to raise pay to attract and keep workers, and in turn would then raise prices to cover higher wage costs. Many Fed officials historically would then support raising interest rates to forestall what was called a "wage-price spiral."
But now, Powell says, the unemployment rate can likely fall much further than in the past without sparking inflation, which means that interest rates can also stay lower.
"I think we're learning all of those things," he says.
Federal Reserve Chairman Jerome Powell, testifying for a second day before Congress, is delivering the same message: that the central bank is prepared to cut interest rates to support the economy, raising hopes that the first reduction in its key policy rate in a decade could happen later this month.
Powell's prepared testimony to the Senate Banking Committee is identical to the remarks he delivered Wednesday before the House Financial Services Committee on Wednesday.
In his opening comments, Powell says that "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook."