William C Dudley: Household borrowing, student debt trends and homeownership Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Press Briefing on Household Borrowing, Student Debt Trends and Homeownership, Federal Reserve Bank of New York, New York City, 3 April 2017. * * * Andrew Haughwout, Joseph Tracy and Wilbert van der Klaauw assisted in preparing these remarks. Good morning, and welcome to the New York Fed’s Economic Press Briefing. Today, we will focus on recent developments in household borrowing, with special attention on student debt. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. Following a period of steady deleveraging that began during the Great Recession, households have gradually increased their borrowing during the past three years. Later this year, total household debt is expected to reach its previous peak, from the third quarter of 2008. Given past experience, one might wonder whether this level of indebtedness is sustainable or a reason for concern. Answering this question requires a fuller consideration of household balance sheets and a deeper analysis of who is indebted. The increase in liabilities in recent years has been accompanied by significant improvements in the value of assets held by households, due to strong growth in housing and stock prices. Moreover, household incomes have been rising at a moderate pace due to sturdy job gains and modest wage increases.

Compared with the June 2022 Eurosystem staff Broad Macroeconomic Projection Exercise, headline inflation has been substantially revised up in September by 1,3 percentage points to 8,1 percent for 2022, by 2 percentage points to 5,5 percent for 2023 and by 0,2 percentage points to 2,3 percent for 2024. Energy price inflation remained extremely elevated, at 38.3 per cent, and it was again the dominant component of overall inflation. Market-based indicators suggest that, in the near term, oil prices are likely to moderate, while wholesale gas prices will stay extraordinarily high. The relatively high import share of gas needed for the EU27 energy consumption will create extensive challenges in the winter months of 2023, especially in countries with gas-intensive industrial sectors. In fact, the recent Purchasing Managers' Indices (PMIs) in the manufacturing sector have dropped notably. Food price inflation also rose in August, to 10.6 per cent, reflecting higher input costs related to energy, disruptions of trade in food commodities and adverse weather conditions. While supply bottlenecks have been easing, these continue to gradually feedthrough to consumer prices and are putting upward pressure on inflation, as is recovering demand in the services sector. The depreciation of the euro has also contributed to the rising inflationary pressures, together with the aforementioned supply and demand factors. Governing Council latest meeting decision Against this background, in our latest meeting last Thursday, the Governing Council of the ECB decided to raise the three key ECB interest rates by 75 basis points.