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Federal Reserve Chair Jerome Powell faced tough questions about the housing market during a Congressional hearing on Tuesday, days after President Donald Trump renewed his threat to fire the central banker over elevated interest rates.
Appearing before the House Financial Services Committee to present the Fed’s monetary policy report, Powell fielded criticism from both Democrats and Republicans over the central bank’s decision to hold rates steady since December.
Rep. Rashida Tlaib, a Michigan Democrat, grew impassioned as she spoke about the housing crisis and high eviction rates for young Black women in her district, as she argued that the Fed’s current policy rate was suppressing much-needed residential construction.
“We’re talking about a housing crisis that is getting worse right now,” she said. “I come from a community right now that I believe is now being impacted by the current framework that you’re putting together, that I do feel like it’s going to be long-term effects on the housing crisis, and you’re ignoring it.”
“No, we’re not,” Powell responded coolly. “Actually, we think the very best thing we can do is to fully restore price stability at the aggregate level. That will be the best thing for homeowners and for homebuilders, and for everybody else, in the long run.”
The tense exchange marked a rare point of agreement between Tlaib, a member of the “Squad” of progressive Democrats, and the Republican Trump, who has furiously demanded that Powell lower rates to ease borrowing costs for the government and consumers.
Hours before Powell’s testimony, Trump posted on Truth Social that he believes the current Fed rate of 4.25% to 4.5% should be “at least two to three points lower.”
“I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come,” Trump added.
Last week, Fed policymakers held the central bank’s policy rate steady in the range where it has remained since December, defying Trump’s repeated calls over many months to lower the rate.
Trump responded by renewing his threats to fire Powell, a legally dubious move, and even mused about the possibility of appointing himself as Fed chair when Powell’s term expires next year.
At Monday’s hearing, Powell consistently defended the current federal funds rate as appropriate for the current circumstances, saying that the Fed is laser-focused on its dual mandate of preventing runaway inflation and fostering a strong labor market.
The Fed uses higher interest rates to control inflation, and lower rates to encourage job creation.
“The Federal Reserve remains squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Despite elevated uncertainty, the economy is in a solid position,” Powell said in his opening remarks.
Still, during the hearing, Powell faced criticism from both sides of the aisle over the Fed’s rate policy, with lawmakers hammering him over the role that high mortgage rates have played in the housing affordability crisis.
Rep. Bryan Steil, a Wisconsin Republican, raised the issue, noting that “higher rates have a significant impact on the housing market, as shelter and housing costs are a significant driver of why many families can’t afford the things that they need.”
In response, Powell said, “We realize that people are feeling high housing costs and high financing costs.”
He noted that annual inflation for shelter costs, a major component of the consumer price index, has been trending down regularly for some time.
“So that’s good news for people,” said Powell. “It is showing through into measured inflation now. Again, in the long run, the best thing we can do is restore price stability and let the market work, even though we’re still going to have a housing shortage.”
Powell reiterated his point later on when Rep. Marlin Stutzman, an Indiana Republican, pressed him on the role that higher mortgage rates have played in depressing homebuying activity.
“We see the same thing you do in the housing market. It’s tough,” said Powell. “People are locked in. They can’t afford to get out of their house, because the cost of getting into a higher-price mortgage would be a lot.
“The best thing we can do, though, is to get inflation sustainably down to 2% and have it stay there over a long period of time, and that is really what we can offer to them,” he added.
Realtor.com® senior economist Jake Krimmel says that Powell’s remarks in the hearing suggest that he is still in “wait-and-see” territory, but that he has not ruled out a July cut entirely.
“The uphill battle, though, is that Powell expects to see higher inflation this summer due to tariff-driven price pressures. And whether that expectation becomes reality will be key,” he says.
Fed policymakers will meet to make their next rate decision on July 29-30. Several members of the decision-making committee have said in public remarks that they are open to a rate cut at that meeting, although financial markets put the odds of a cut at less than 20%.