Jerome PowellThe US President, Mr. Federal ReserveDuring a Senate Banking, Housing. Urban Affairs Committee Hearing in WashingtonDC, US, on Tuesday, July 9, 2024.

Tierney L. Cross | Bloomberg | Getty Images

Federal Reserve Chair Jerome Powell On, Tuesday It was expressed that keeping interest rates high for too many years could harm the economy.

Setting The stage for a 2-day appearance on Capitol Hill This week, the head of the central bank said that the economy and labor market remain strong, despite recent cooling. Powell He cited some easing of inflation which he said that policymakers remain resolute to bring down to their 2% target.

“At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” He said in prepared remarks. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

The Commentary coincides with approaching anniversary of last time the Federal Open Market Committee Raising benchmark rates

The Fed’s Overnight borrowing rates are currently in a rage between 5.25% and 5.50%. It is the highest rate in 23 years. The increase was a result of 11 consecutive increases following the inflation reaching its highest levels since the 1980s.

Markets Expect the worst Fed Rates to be cut in September likely to follow up with a quarter-point reduction in the next quarter of the year. FOMC members in their June meeting, however, indicated just one cut.

‘Strengthen Our confidence

In recent days, Powell His colleagues have stated that inflation data has been somewhat encouraging After a surprising jump at the start of the year. Inflation According to the Fed’s You can also find out more about the following: personal consumption expenditures price index At 2.6%, May after peaking above 7% in June 2022.

“After a lack of progress toward our 2 percent inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell said. “More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”

The Statement is part of the congressionally mandated biannual updates on monetary policies. After Delivering the remarks Powell Questioning by Senate Banking Committee Members on TuesdayThen the House Financial Services Committee On, Wednesday.

In past appearances, Powell The committee has been forced to avoid politically charged questions while avoiding dramatic policy statements. The This year, the questioning of questions could be contentious. Washington A volatile presidential campaign has put the nation on edge.

Several Democratic Members of the committee are encouraged Powell Soon, rates will be reduced.

“I’m concerned that if the Fed waits too long to lower rates, the Fed could undo the undo the progress we’ve made on creating good paying jobs,” Sen. Sherrod Brown (D-OhioThe chair of the committee told Powell. “If unemployment trends upward, you must act immediately to protect Americans jobs. Workers have too much to lose if the Fed overshoots [its] inflation target and causes a completely unnecessary recession.”

However, Powell The Fed The company does not engage in any political activities and only focuses on its own responsibilities. In He stressed the importance in his prepared remarks of “the operational independence that is needed” For the best, Fed It is doing its job.

His Other remarks were centered on the policy stance in relation to a broader economy. Recent Data has shown that unemployment rate creeping higher The gross domestic product is declining. Both Manufacturing and service industries reported contraction in the year. June.

But Powell Data shows that “the U.S. economy continues to expand at a solid pace” Despite the deceleration of GDP.

“Private domestic demand remains robust, however, with slower but still-solid increases in consumer spending,” He said.

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