Several Democratic senators urged the Federal Reserve on Sunday to cut interest rates, which they argue have “aggravated the country’s persistent crisis of housing access and affordability.”
In a letter to Fed Chair Jerome Powell, Sens. Elizabeth Warren (D-Mass.), John Hickenlooper (D-Colo.), Jacky Rosen (D-Nev.) and Sheldon Whitehouse (D-R.I.) said the central bank’s decision to rapidly raise rates has resulted in higher costs for homebuyers and renters, as well as a lack of new construction.
“As the Fed weighs its next steps in the new year, we urge you to consider the effects of your interest rate decisions on the housing market and to reverse the troubling rate hikes that have put affordable housing out of reach for too many,” the group wrote in Sunday’s letter.
The Fed repeatedly raised interest rates throughout 2022 and 2023 to tame inflation, which peaked at a 40-year high of 9.1 percent in June 2022.
Inflation has since cooled significantly, with consumer prices up just 3.4 percent year-over-year in December, and the central bank has held off on further rate hikes at its last three consecutive meetings.
While the Democratic senators acknowledged the Fed’s decision to hold rates steady in recent months, they warned that “interest rates are still too high for many American families, who already cannot afford to pay rent or buy their first homes.”
Mortgage rates, which tend to follow interest rates, have climbed over the past two years. In late October, the average 30-year fixed mortgage rate rose to nearly 8 percent, marking a two-decade high. It has since fallen to an average of 6.69 percent.
Higher mortgage rates have led to higher costs for homeowners and deterred prospective first-time homebuyers, who remain in the rental market, the senators noted.
However, they suggested that high interest rates have also translated into higher rental costs, as landlords pass off the costs of higher mortgage rates onto their tenants.
The Democratic senators also warned that this lack of housing affordability “places a disparate burden on the shoulders of Black and Hispanic households.”
The Fed panel responsible for deciding monetary policy is set to meet later this week. While it is largely expected to hold rates steady at its January meeting, most Fed officials said in December that they expect at least two rate cuts in 2024.