WASHINGTON – Federal Reserve Chairman Jerome Powell said that concerns about a housing bubble had been overcome, but the central bank was closely monitoring rising house prices, which could make it harder for entry-level borrowers to obtain mortgage loans.
The Fed has voiced some criticism of the loose monetary policy, which some critics say has fueled the housing boom as more borrowers compete for less available homes.
But Powell said at a news conference Wednesday after a meeting of the Federal Open Market Committee that he had no financial stability concerns in relation to such a highly competitive real estate market.
"It's part of a strong economy where people want to spend money and invest in real estate. It's good in that sense," he said. “It is clearly the strongest real estate market we have seen since the global financial crisis. I hope that over time the home builders can respond to this demand and find more supply and that workers can get back to work in this industry. "
As of March 2020, the Fed began buying mortgage-backed securities and treasury bills to keep borrowing costs down. The central bank is currently buying $ 40 billion worth of agency MBS every month with no signs of slowing down. However, Powell said he doesn't think these purchases will fuel any kind of housing bubble.
"I hope over time that home builders can respond to this demand and find more supply and get workers back to work in this industry," said Jerome Powell, chairman of the US Federal Reserve.
“It is not intended to directly support the housing market. That was never the intention, ”said Powell. "It is a situation where we will reduce asset purchases when the time comes and those purchases will go to zero over time and that time has not yet."
In contrast to the 2008 financial crisis, Powell added, borrowers looking to buy homes are "in very good financial shape."
"We don't have something like that where we have a real estate bubble where people are overran and own a lot of houses," he said. "However, there is no question that property prices are rising, and so we are watching it closely."
Powell also reiterated separately that he would like the Fed to carefully examine the idea of a central bank digital currency in the US without worrying about the pace at which other countries are adopting digital currencies. For one thing, China has been quick to implement its "digital yuan" and has made some officials concerned that the country is trying to oust the dollar as the world's reserve currency.
However, that potential is overstated, Powell said.
"The currency that is used in China doesn't work here," he said. “It's one that really allows the government to see in real time every payment it's used on. It's much more about things happening in your own financial system than dealing with global competition. "
The Boston Federal Reserve Bank is currently working with the Massachusetts Institute of Technology to develop and test a hypothetical central bank digital currency designed to educate the central bank's work around the concept. Powell has also previously said that without the blessing of Congress, the Fed would not move forward on a digital currency.
"Central bank digital currencies are now possible and we are going to see some of them around the world and we need to understand if this is a good thing for the people we serve [and how it would work in our system"] he said.