Edward Lawrence of FOX Business with more information on the Fed’s decision.
Federal Reserve Chairman Jerome Powell downplayed significant price increases in the U.S. housing market on Wednesday, despite noting that activity in the sector has been at its highest level since before the global financial crisis.
Powell said there was a “very strong recovery” in the housing market – but part of the squeeze that led to price increases is a “passing phenomenon”.
This transitory phase was triggered by the pandemic, as people are spending more time in their homes and wondering whether they need a bigger house or another.
“So there is a unique shift in demand that we think will be satisfied – also that it will demand supply and we think that these price increases are unlikely to be sustained,” explained Powell during a press conference after the FOMC’s two-day policy meeting.
FEEDING NEAR ZERO AMID FEES FRESH SIGNS US ECONOMIC RECOVERY IS TURNING OFF
The latest reading of the S&P CoreLogic Case-Shiller Home Price Indices showed that home prices across the country rose 9.5% in November compared to the same period last year – and rose 8.4% month-over-month. In some major metropolitan areas, such as San Diego and Seattle, price increases have exceeded 12%.
“The National Composite last matched this month’s 9.5% growth rate in February 2014, more than six and a half years ago,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a statement. “From the perspective of more than 30 years of data from S&P CoreLogic Case-Shiller, the 9.5% change year over year in November ranks close to the top decile of all monthly reports.”
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Overall, Powell noted that a full economic recovery in the United States is a long way off, although some sectors – such as real estate – have recovered since the pandemic broke out almost a year ago.
The segments of the economy that continue to be the most affected – such as restaurants and bars – are those where consumers are hesitant to re-engage amid concerns about health and safety. There are also restrictions on establishments in some sectors to minimize the spread of the virus.
The central bank said on Wednesday that it will continue to anchor its federal funds rate close to 0% as it commits to using all the tools at its disposal to support the ongoing economic recovery.
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