The Federal Reserve faces a cooling job market as well as persistently high prices, Chairman Jerome Powell said in written testimony Tuesday, underscoring the Fed’s single-minded fight against inflation over the past two years. Looks like he’s getting close to it. Reduction in interest rates.
The Fed has made “considerable progress” toward its goal of defeating the worst inflation surge in four decades, Powell said in his testimony to the Senate Banking Committee. “Inflation has declined significantly over the past two years”, he said, although it still remains above the central bank’s 2% target.
Powell clearly stated that “increased inflation is not the only risk we face.” Cutting rates “too late or too little could weaken economic activity and employment,” he said. The Fed chairman is addressing a Senate panel on the first of two days of semi-annual testimony to Congress.
On Wednesday, he will testify before the House Financial Services Committee. From March 2022 to July 2023, the Fed raised its benchmark interest rate 11 times to fight inflation, to a two-decade high of 5.3%, from 9.1% two years ago. ,
Those increases increased the cost of consumer borrowing by raising rates for mortgages, auto loans and credit cards, among other forms of borrowing.
The goal was to slow borrowing and spending and cool the economy. In the past, Powell and other Fed policymakers have repeatedly emphasized that the strength of the economy and the low unemployment rate mean they can be patient about cutting rates and waiting to make sure the rate cuts continue. We can say that inflation is indeed under control.
But on Tuesday, Powell said the job market was “cool while remaining strong.”
And he said the economy’s growth has slowed after a strong expansion in the second half of last year. Last week, the government reported that hiring remained solid in June, although the unemployment rate rose for the third consecutive month to 4.1%.
Powell’s prepared testimony on Tuesday did not provide what Wall Street investors are watching most closely: any clear indication of the timing of when the Fed might make its first rate cut.
But the testimony will further boost investors’ and economists’ expectations that the first cut will come at the central bank’s September meeting.
(tagstotranslate)Federal Reserve(T)Fed Powell
