Happy Wednesday and welcome back to On The Money, where we wish were around to witness the Larry David-Alan Dershowitz standoff. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
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THE BIG DEAL—Fed officials signal move toward tapering bond purchases: Federal Reserve officials are moving toward reducing the pace of the central bank’s monthly purchases of Treasury and mortgage bonds by the end of the year, according to minutes released Wednesday from a July meeting.
A growing portion of the Federal Open Market Committee (FOMC), which sets Fed monetary policy, expressed support for paring down bond buying after several months of high inflation and accelerating job gains, the minutes showed.
“Most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes read. “Various participants commented that economic and financial conditions would likely warrant a reduction in coming months.”
The background:
- The Fed began buying up to $120 billion in Treasury bonds and mortgage-backed securities in March 2020 amid the onset of the COVID-19 pandemic.
- The asset purchases, coupled with a steep Fed rate cut, were meant to keep credit flowing through the economy as the financial sector worked through the shock of the coronavirus.
Fifteen months later, an increasing number of Fed officials, lawmakers and investors are urging the bank to begin tapering its asset purchases. I explain why here.
LEADING THE DAY
New home construction falls 7 percent in July: New home construction fell 7 percent in July as builders tackled massive backlogs over newer contracts, according to data released Wednesday by the Commerce Department.
- Housing starts for privately owned homes hit a seasonally adjusted annualized rate of 1.53 million in July, falling below the revised June rate of 1.65 million while remaining 2.5 percent above the same month last year.
- Single-family housing starts were down 4.5 percent, and starts on homes with five or more units plunged 13.6 percent.
Home sales and construction have fallen steadily throughout the summer after surging lumber prices earlier in the year drastically increased the cost of building homes. While lumber prices have fallen closer to historic levels, home prices have continued to break record highs as builders fight through other supply issues and backlogs.
“Builders continue to face significant material, labor and land shortages. We expect residential investment to remain soft in the third quarter,” wrote Yelena Maleyev, an economist at Grant Thornton. I break it down here.
Top Democrat unveils bill aimed at making housing more affordable: Senate Finance Committee Chairman Ron Wyden (D-Ore.) on Wednesday rolled out legislation aimed at making housing more affordable for Americans.
“It’s time America’s lawmakers get with the program and enact 21st century housing policies that adequately address 21st century challenges,” Wyden said in a statement.
According to a summary of the bill from Wyden’s office, the legislation seeks to house everyone experiencing homelessness within five years through housing vouchers.
- The bill would also strengthen the low-income housing tax credit, which is provided to developers of housing for low-income tenants, and it would create new tax credits for developers who house middle-income tenants and for property owners who rent to low-income tenants.
- Additionally, it would establish a tax credit for first-time homebuyers.
Here’s more from The Hill’s Naomi Jagoda.
GOOD TO KNOW
- Reuters: “The International Monetary Fund said on Wednesday that Afghanistan will not be able to access IMF resources, including a new allocation of Special Drawing Rights reserves, due to a lack of clarity over the recognition of its government after the Taliban seized control of Kabul.”
- Danny DeVito on Wednesday expressed his support for a boycott of Nabisco products as employees at three of the snack company’s bakeries strike following failed contract negotiations.
ODDS AND ENDS
- Sens. Richard Blumenthal (D-Conn.) and Ed Markey (D-Mass.) are calling on the Federal Trade Commission (FTC) to investigate Tesla’s marketing of a partially assisted driving feature known as Autopilot.
- T-Mobile said Wednesday that data from 40 million former and prospective customers was compromised by hackers as part of a recent breach of the telecom giant.