Jerome Powell will participate in the monthly hearing of the US Senate Banking Committee.
The president of the United States Federal Reserve (Fed), Jerome Powell, appears this Tuesday before the Senate Banking Committee at a hearing likely to assess whether recent signs of slowing inflation and the U.S. labor market will prompt the central bank to accelerate its plans to cut interest rates.
At the meeting of the Fed On June 11 and 12, the average projection of 19 managers was a single interest rate cut by a quarter of a point by the end of the year, but inflation data has since been weaker than expected and several policymakers — including Powell — have begun to signal concern about a slowing labor market.
Data last week showed businesses added 206,000 jobs in June, but revisions to prior months show the trend is down, and Powell in recent public comments said USA may be at the point where further economic weakness causes the unemployment rate to rise. The jobless rate has already been rising, to 4.1% in June, from 3.4% in April 2023, a figure that matched a 55-year low.
The consumer price index, meanwhile, did not rise in May, and analysts expect another weak reading when June data is released on Thursday. “We understand very well that we have two-sided risks,” Powell said last week, capturing a sense among Fed officials that they can no longer focus solely on reducing inflation when deciding how long to maintain their current tight monetary policy but must also consider how tightly to guard against an excessive slowdown in the economy.
“We understand that if the labor market softens too much we may lose the expansion,” Powell said at an economic conference in Portugal sponsored by the European Central Bank.
Whether or not that risk leads Powell to open the door to a rate cut as early as September, it will be one of the main themes when he appears before the Senate Banking Committee in the afternoon in his last semiannual round of appearances before Congress on monetary policy. On Wednesday he will appear at the same time before the House Financial Services Committee.
In appearances before the Congress, Powell is often questioned on a wide range of topics and the questioning could be more extensive and intense in the run-up to the November presidential election. The next meeting of the Fed The meeting will take place on July 30-31, and since the June meeting, investors have increased bets that the Fed will cut interest rates in September. For that to happen, Powell could well start communicating that the door is at least open, paving the way for more explicit changes in the next statement in July indicating that inflation is approaching the central bank’s 2% target.
The inflation target is set in reference to the price index of the Personal Consumption Expenditure, which in May increased at an annual rate of 2.6%. In a report to the Congress published on Friday before Powell’s appearance, the Federal Reserve He noted that there had been a “moderate” and continued rise in inflation this year and good reason to believe that price pressures in the housing market, a factor that has contributed significantly to the recent persistence of inflation, were easing.
Combined with concerns about the labor market, this should “leave the Fed “more concerned about the risk of recession than persistent inflation,” wrote economists at Pantheon Macroeconomics after the latest jobs report.
Source: Ambito
