Senator Elizabeth Warren and three Democratic colleagues have called on Federal Reserve Chair Jerome Powell to consider cutting interest rates to address the ongoing crisis of housing affordability. In a letter dated January 28, the senators highlighted the adverse impact of high interest rates on housing accessibility and urged the Fed to reverse rate hikes that have exacerbated the affordability challenges faced by many Americans.
Senator Elizabeth Warren, along with three Democratic colleagues, has issued a plea to Federal Reserve Chair Jerome Powell, urging the central bank to consider lowering interest rates to address the pressing issue of housing affordability. In a letter dated January 28, the senators underscored the detrimental effects of high interest rates on housing accessibility and called for a reversal of rate hikes that have exacerbated affordability challenges for many Americans.
The letter, which was co-signed by Senators John Hickenlooper of Colorado, Jacky Rosen of Nevada, and Sheldon Whitehouse of Rhode Island, emphasized the critical role of interest rate decisions in shaping the housing market landscape. Warren, a prominent critic of the Fed’s rate-hike campaign, has long advocated for policies aimed at mitigating the housing affordability crisis.
In their communication to Powell, the senators highlighted the Fed’s efforts to raise interest rates over the past two years, leading to a range of 5.25% to 5.5%—the highest levels in 22 years. These rate hikes have contributed to the escalation of mortgage rates, with the effective rate on a 30-year mortgage surpassing 8% last year, although it has since moderated.
Warren and her colleagues argued that elevated mortgage rates have exacerbated the housing supply crisis, placing additional pressure on rental costs. They stressed the urgent need for policy intervention to alleviate the affordability challenges faced by American households.
The Fed, acknowledging the impact of its monetary policy on housing affordability, has slowed down its pace of rate hikes in recent times. Powell and his colleagues have hinted at the likelihood of future rate cuts, with market expectations pointing towards potential cuts as early as the spring. In projections released in December, Fed officials indicated the possibility of three interest-rate cuts this year.
As policymakers convene for the central bank’s policy meeting this week, the focus remains on addressing the multifaceted challenges posed by housing affordability. While interest rates are expected to remain unchanged in the immediate term, the senators’ advocacy underscores the importance of prioritizing measures to alleviate the housing crisis and ensure greater accessibility for all Americans.
