Federal Housing Finance Agency (FHFA) Director William J. Pulte has taken to the social media platform X to call for a reduction in the federal funds interest rate, calling out Jerome H. Powell, Chair, Board of Governors of the Federal Reserve System.
“Jay Powell needs to lower interest rates—enough is enough. President Trump has crushed Biden’s inflation, and there is no reason not to lower rates. The housing market would be in much better shape if Chairman Powell does this,” said Pulte in a post Monday on X.
The Federal Reserve System performs five general functions to promote the effective operation of the U.S. economy:
- To promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
- Promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
- Promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
- Fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
- Promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
The President does not have direct control over the Federal Reserve’s policy decisions, but does have some influence. The President can nominate and appoint members of the Federal Reserve Board of Governors, including the Chairman, which can influence the overall direction of the Fed, and can also voice their opinions about monetary policy. The President selects one member of the Board of Governors to serve as Chair of the Board, who also serves as the FOMC (Federal Open Market Committee) Chair. The FOMC, which makes the actual monetary policy decisions, is made up of all seven governors and five of the 12 regional Federal Reserve Bank Presidents. While the chair has one vote like the other governors, the structure is designed to prevent one individual, including the president, from dictating decisions and policies.
In early May, the FOMC concluded its bi-monthly meeting and announced that it was holding the federal funds rate at 4.25%-4.50%. The goal of the FOMC is to achieve maximum employment and inflation at the rate of 2% over the longer run, according to their post-meeting statement.
“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” said the FOMC in a statement. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
According to the Bureau of Labor Statistics (BLS), unemployment rates were higher in April in three states and the District of Columbia, lower in two states, and stable in 45 states. Twenty-six states and the District of Columbia had jobless rate increases from a year earlier, one state reported a decrease, and 23 states had little change. The national unemployment rate was unchanged at 4.2%, but was 0.3 percentage points higher than reported in April 2024.
Powell recently discussed how the FOMC will begin to analyze its framework, and the methods used to set interest rate policy and communicate it to the public, marking the first time the Fed will do so since 2020.
“We will reconsider aspects of our strategic framework in light of the experience of the last five years,” said Powell as he addressed the recent Thomas Laubach Research Conference. “We will also consider possible enhancements to the Committee’s [FOMC] policy communication tools regarding forecast uncertainty.”
Powell continued to mention that the Fed will closely examine the lessons of the 2021 inflation surge and path that global interests took after this surge in crafting its new framework.
