Federal Reserve Chairman Jerome Powell kicked off his semiannual update to Congress on Tuesday, appearing before the Senate Banking Committee. He will appear before the House Financial Services Committee tomorrow.
Jennifer Schonberger of Yahoo Finance tells the following story:
Powell indicated that the central bank is becoming more confident about cutting rates. He said he was encouraged by the evidence of lower inflation and that more “good data” would help the Fed get where it wants to be.
Inflation numbers “have shown modest further progress” after some higher readings in the first quarter, “and more good data would strengthen our confidence that inflation is moving toward 2% on a sustained basis,” he said in prepared testimony to U.S. lawmakers on Tuesday.
It is the second time in the past week that Powell has been optimistic about the inflation picture. On Tuesday, he noted that the last two inflation figures from April and May “do indicate that we are getting back on a disinflationary path.”
The next measurement of inflation, measured by the consumer price index, is expected on Thursday.
Inflation is not expected to get worse, but it is also not expected to fall. Based on the “core” CPI — which strips out volatile food and energy prices that the Fed cannot control — inflation is expected to remain steady at 3.4% in June, compared with the same level in May.
Powell noted in his prepared testimony that the Fed will continue to make decisions on monetary policy on a meeting-by-meeting basis. He reiterated that cutting rates too quickly could undo progress in reducing inflation, while keeping rates high for too long could weaken the economy and the labor market.
Democrats are expected to push Powell to cut rates soon, while Republicans are likely to pressure Powell to set bank capital rules and stress that rates should not be cut too close to the November elections.
Powell stressed in his testimony that Congress has entrusted the Fed with the operational independence needed to take a “long-term perspective” in pursuing its dual mandate of maximum employment and stable prices.