what's is gradually easing. that's good news. many georgians still feel the sting of unaffordable homes and mortgages. one reason i have discussed as we aren't building and houses. 2022 in the journal increase ing stock, rents decreased by 1%. we have discussed this issue, particularly the effects of housing supply on housing costs. you agree well the federal reserve does not control housing supply, it can help create the environment that encourages the construction of new housing, particularly affordable housing. how has the fed been working to foster an environment that encourages home construction and what in your view are the

challenges that remain? chair powell: in the long run, the absolute best thing we can do for the housing market and the economy is to sustainably bring inflation back down so that people are not talking about it anymore. it is assumed by everybody in their daily lives inflation will be around 2% which is where we were for a long time. we want to get back to that. interest rates can come down, the housing market can return to the state it was in before the pandemic which is to say really tight jim we don't have enough housing and that is not a monetary issue. in the short term, i would say tight monetary policy weighs on the housing market. the policy works through interest sensitive spending and housing is at the top of interest sensitive spending. we are -- our higher interest

rates have led to lower housing starts and lower activity in the housing market but we are doing that to get back to 2% inflation for the whole economy so the housing market can be on a better foundation. sen. warner: when you have these high interest -- supple warnock and you have these high interest rates, you see particularly in a state like georgia, these institutional investors who are coming into the space and they are buying houses in all cash foxing out first generation homebuyers and the conditions for them to that improved with higher interest rates. would you agree with that assessment? chair powell: they are working with -- 5 you have high interest rates and the regional buyers who can purchase that at all cash.

chair powell: i'm just saying higher interest rates does not make their investment any cheaper. i understand it is a sensitive issue and in most markets it is a small portion of the outstanding housing stock. it is not an issue for us. they are a legal buyer of housing. our job is the whole economy. it is a question for legislators. sen. warnock: how can the fed better deploy its monetary tools to ensure we are meeting key inflation objectives like housing affordability? chair powell: i think the best thing we can do is to -- what we think we have been doing which is to move carefully as we think about loosening policy and picture when we do that when we have got greater confidence, inflation is moving sustainably down toward 2%. we are keeping a close eye on the labor market and if we see unexpected weakening, we can respond to that to that is the

best thing we can do for the whole economy and for the housing market too. sen. warnock: you point out you are limited in terms of your influence. there is a role for congress to be sure. which is one of the reasons i wanted to be on this committee to introduce a down payment toward equity act with senator butler. this bill would help first generation homebuyers compete with wall street institutional investors by helping with down payment costs, closing costs and costs to reduce interest rates. i look forward to continuing productive conversations with you and looking at how we can make housing more affordable for all americans. i'm running out of time but one of the other concerns i maintain with respect to reducing the racial wealth gap is this issue around home appraisals. the fed is part of their agency

task force on property appraisal and valuation equity. what expertise and perspective has the fed brought to the task force and how are you responding to this issue of home appraisals? chair powell: we have been an active participant in that task force and we bring all the expertise we have in the housing market as well as regulatory supervisor economic expertise generally. i will also say our strongly held view is discrimination has no place in the banking system and that a clue that includes appraisals. sen. warnock: i was glad to see cfpb and other agencies recently finalized a rule that create strong antidiscrimination standards for automated home valuations. the fed has not yet approved this rule. why not and does the fed plan to do so?

chair powell: sorry -- sen. warnock: you have not yet approved the rule that was suggested by the cfpb appeared they finalized a deck by the cfpb appeared they finalized a rule. chair powell: i'm not aware it is a rule we have to finalize too. is that the case? sen. warnock: that is my understanding. chair powell: let me follow up with you on that. i'm not aware of that. >> senator daines of montana is recognized. sen. daines: thank you for being here today. it is not lost on anybody here election season is in full swing and from now until election day, democratic colleagues in congress and the bite harrison administration will waste no time attempting to sell a fairytale to the american people that financially and economically they are better off now than they were almost four years ago. when president biden took office inflation was at 1.4%.

's failed policies drove us to the highest inflation have seen in 40 years. the folks back home in montana are not full because in every part of their lives, inflation is not some kind of hypothetical. they see the everyday impacts of the decades hi inflation brought on by the policies of the biden administration and facilitated by congressional democrats. the costs of most goods and services across the economy are more expensive than they were in 2020 and that is a fact that no amount of political spin or mental gymnastics can make go away. breakfast cereal, prices have increased 28% since january of 2020. gas prices increased 36% from the national average of 2.63 a gallon to 2.58 per gallon. prices have jumped three dollars per dozen in 2024, double the

cost of 1.45 in february of 2020. this dishonesty does not stop with inflation. on the labor market, while president biden and senate democrats are celebrating a victory lap in light of the recent jobs report showing a 206,000 jobs last month, they are willfully ignoring the fact that more than a third of the job gains came from the government sector. mr. chairman, i commend you for the job you have done thus far in trying to rein in inflation. i you to continue the fight despite the political pressures you may face. i'm also encouraged by the comments he made earlier this month about the dire need for washington to address its fiscal imbalance. i could not agree more. i have said many times and continue to believe washington's culture of record was spending,

excessive borrowing is leading us down a dangerous path by leaving future generations with mountains of debt and am happy to hear you agree with that assessment. given it is an election year, you are facing immense political pressure to lower rates. you have done an admirable job in using the tools at your disposal to fight inflation and i urge you to continue to be led by data and not calendars or political influence. you said as recently as last week while things are trending and the right direction, you would need to see further evidence for cutting rates . what specifically are you looking at and looking for as we head into the next fomc meeting and how do you factor in the recent labor data and the significant part of that being government jobs? chair powell: we are looking for two things. one is more good inflation data.

we had quite a lot of good inflation data the last seven months of last year and then we had a bump in inflation in the first quarter and now we have had one good and one very good inflation reading and we need more good data so we can be confident what we are seeing is that is where inflation is going. . it is going back down toward 2%. right now we are at 2.6%. that is not inflation. on the labor market. we have seen the labor market has cooled really significantly across so many measures and a number of people have pointed them out. the unemployment rate has moved up. you have seen a labor market in balance, where was in 2019. it is not a source of broad inflationary pressures for the economy but it is still a strong labor market. four point 1% unemployment is a good and historically low unemployment rate. we have a mandate to support

maximum employment and we also are paying close attention and if we see the labor market were weakening unexpectedly which is to say more than what we have seen in a material way, unexpectedly, we could also respond to that because we have a dual mandate and we see the two mandates as more in balance than they were a year ago. the focus had to be and was on inflation. now many to be focusing on both goals. sen. daines: i want one question on basil three. in march this committee agreed it was seriously flawed and needed to be completely rewritten. i was encouraged to see reports last month the federal reserve had provided other financial regulation and possible changes to the proposal. i continue to believe the proposal should be scrapped altogether, but could you share the plan -- what you are planning to make?

chair powell: we have had discussions led by the vice chair for supervision. we have made a lot of progress in giving close to an agreement on a set of proposed changes. the work that remains is to agree on a process for how we are going to move forward. it is our view institutionally we need to put the changes out for comment for some period of time so the public, all members of the public who want to comment can see them again and comment on them again in the context of the quantitative impact survey we did. that is how we would ordinarily proceed and we don't see why we would deviate from that. as of the conversation we are having leadership from the fdic's. my hope is will be able to come together around a way to proceed forward. i hope we would have done so by now but i'll be -- but i believe we would have done so soon. >> i look forward to working

with you to strengthen this economy. for senators who wish to submit questions for the hearing record, they are due one week from today july 16. to chair powell, please make your responses to questions for the rest no more than 45 days from the date you receive them thank you for your testimony. >> we are still hovering at a record high up about 2/10 of a percent to take a look at the nasdaq 100. record highs on the stock market. the bond market, it is a small move but it is a move nonetheless. you have seen yields climb at the long end. currently up three basis points on the 10-year gilts should back above 430. we are going to unpack what jerome powell said and what the follow-through to markets is to >> if -- markets is checked >>

one chart of the 10 year yield moving throughout the day, he climbed higher and higher. the yield did throughout palace testimony. -- throughout powell's testimony. that means no one is expecting a rate cut to come anytime soon. they are selling this debt and pushing the yield higher. katie: jerome powell did not want to commit to anything when it came to timing. let's unpack this with mike mckee. tell us about the substance of what he said. mike: it is but he what we expected from him. he talked about the economy being strong and the labor market coming at a better balance. he said at the end it is not a source of inflationary pressure or a lot of inflationary pressure which is a key view for the fed because they have been looking at the service industries and wages going up as a guidepost to went things would get better. inflation is getting better. he says they are not there yet

but the fed has said in the past although he did not repeat it they would start cutting before they get to 2%. kind of leaves things where they are. i had to make up a graphic of the key quote of the day which is what the markets are waiting for an jay powell said this twice today. today i am not going to give any signals about future moves. this is the bottom line for the folks on wall street. there was nothing in here you should read into this about when we would start cutting rates. a lot of stuff on banking. a lot of bank regulation questions. he basically said the proposals they are working on, the basel implementations should be finished sometime soon but probably because they are going to go through another commentary phase, would not be put into practice until next year. one interesting question he was asked about was the supreme court ruling in the chevron

defense case. he was asked if the fed makes regulations and the supreme court or some other court could overturn them, what would happen? he said we work very hard to keep our regulations within the law and we think that will not be a problem for us but it is a new decision so we don't really know. katie: i want to bring in liz mccormick of bloomberg news who covers global macro and we were talking a little bit outside of the initial talk around rate cutting. you had a lot of topics outside of that but you did see the treasury market respond as we have been talking about. how are traders repositioning now a bit and repositioning into thursday cpi reading? liz: i think mike is my brother from another mother because that one quote i said, i said that to my boss as well. i think bond yields are up

slightly i think because powell was balanced like mike said. you don't see pricing going away. people were not able to say he got more dovish. some people thought he might because of friday's soft jobs. he did say the labor market is cooling significantly but he stressed we need more data. our mandate is more balanced. it was not enough for people to push yields lower. we have the three year note today. tens and 30's. some set up ahead of the auction with people wanting yields higher to get a better rate at the auction. powell was a bit balanced, not dovish that some had hoped for. he had supply coming. that left people saying what's put yields higher. >> i thought the labor discussion was interesting. i find the theory fascinating about the group of the labor force via immigration and mickey

bowman had come into the couple weeks ago. if we get more restrictive in terms of incoming labor, we are going to see more tightness in the labor market. if you have millions of people flowing in, that gives more demand to the labor side and brings inflation down a little bit. mike: it could work both ways. if you have a tight labor market because you cut back on immigration, that could push up wages. we have cut back on illegal immigration. it has fallen quite a bit since the president put in his new policies. economists have been looking at the level of immigration, both legal and illegal and noting it has contributed to a lot more people in the labor market. jay powell talked about that today without making a value judgment. one thing we are seeing is the birth rate among americans going down. we have fewer people entering

the labor force on a regular basis so for the u.s. it helps to have immigrants and leaving the value judgment of whether they are legal or illegal, the more immigrants we have the better the labor market can do because more people equals in theory more productivity. it is an ongoing interesting issue for economists and certainly a political issue in washington. katie: i'm going to give you the last word. we have been talking about cpi. we get another release this week to jp morgan finds the s&p 500 is poised to move .9% in either way. how important is this for the bond market? how much potential for volatility is there? liz: i think it is very important because this more data chairman powell wants to see front and center is cpi. inflation as he said last week, we are seeing disinflation come but they want to see more.

if somehow this is a surprise stronger than expected cpi, i think in the bond market is not going to like that. like jp morgan, i would not argue with them in saying you're going to see a lot of volatility in stocks. i can't see you are not going to see it in bonds as well. we are going to go from data to date appeared you're going to see these big moves. if things are way below or way above expectations. it is going to be a big deal for markets. we will be busy. katie: there are three more cpi prints before the september meeting so a lot to look forward to. our thanks to mike mckee and liz mccormick. this is bloomberg. ♪ (♪♪)

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to force big banks to hold significantly more capital. it is a move that can mark a major win for wall street banks because we know those rules are in the process of being revised. we are joined by bloomberg banking regulation reporter tonga johnson pit when you heard the dispute happening amid lawmakers in the senate banking committee, what did you hear about the debate itself? how much more can these new rules face more contest? >> it was interesting to hear powell describe yes, there will be changes and they are close to bringing those changes to a reaper proposal. what he did not mention was what the substance of the changes would be or how the big banks would benefit. we have done much reporting on where the discussions are including a story last month. but really it won't matter how

substantive the changes are and whether the occ and fdic, the other agencies that have to vote on the plan, whether they can come to an agreement everyone is satisfied with. powell has made clear there should be consensus and a lot of the debate internally is what consensus looks like across the three agencies. >> what did you make of the fiery back-and-forth between elizabeth warren and powell, van hollen piled on as well in terms of regulations the fed still needs to make dealing with bankers pay? katanga: it is an interesting debate. in a lot of ways the fed should consider whether the fdic's move ahead on that particular plan gets in the way of them making a move that could see the plan advance. there is a lot of expectation because of the heated exchanges on the hill. banks are eager to land -- to

hear where the fed would land on the executive comp a rule but whether the fed will take the cue from the fdic or the occ and whether they come up with a new plan entirely is yet to be seen. it is an interesting tension point when you think about that plan and other pending rules separate from the capital plan regulators might be thinking about and they are trying to get closer to the capital plan takes a lot of oxygen out of the room. on executive comp, will have to see if they are able to get to that ahead of capital or afterward. sonali: for the thing you mentioned is the potential trading desk changes and one thing that was interesting is the concern that they drew around what would happen if the five largest hedge fund counterparties failed. at max leverage at the end of last year heading into this year. how do you think that plays out in terms of how the new might look like for the trading desk? katanga: big banks would not admit they have been pricing in

what the impacts of the capital plan would be on their trading desks and i imagine they are weighing altogether with the cost of these regulations would mean but it is perhaps too soon beyond a forecast too soon to say what exactly it would cost them in terms of complying with the new rules and how their trading decks might be impacted. until the agencies decide how they went to address -- how they want to address the capital plan and how the market risk is priced in. other aspects to their trading books i imagine our friend of mine for them but it may not be front of mind for regulators in the same way. comes back to capital. katie: really appreciate your reporting after several hours of listening to jerome powell on capitol hill. take a look at markets right now. the s&p 500 on track for a 36 record close so far this year. it is an even split if you look at the composition of the index.

big tech also rallying. the bond market a little bit of a selloff. bloomberg crypto with sonali basak is coming up next but that does it with -- does it for bloomberg open interest. this isloomberg. ♪

sonali: live from bloomberg's headquarters in new york, i'm sonali basak and welcome to bloomberg crypto come a look at the people, transactions and analogy shaping the world of decentralized finance. i'm joined by bloomberg intelligence senior analyst eric balchunas, one of the authorities on crypto etf's. i but that is not a job you thought you would up to have.