The president of the United States Federal Reserve (Fed), Jerome Powell, appeared this Tuesday before the Senate Banking Committeewhere he assessed recent signs of slowing inflation and the US labor market, data that support his plans to cut interest rates.
USA no longer has “an overheated economy,” according to Powell, from a working market which has “cooled considerably” since the extremes of the pandemic, and is in many ways back to where it was before the health crisis.
He also suggested that the case for interest rate cuts was becoming stronger. “We are very aware that we are facing risks from two sides” and can no longer focus solely on inflation, he said on Tuesday. “The labor market appears to be fully balanced again,” he continued.
Powell also bluntly told lawmakers that “I’m not going to send any signals today about the timing of any future action” on interest rates, while the Democrats They questioned him about the risks to the labor market and the Republicans on the suffering of households from inflation that remains above the central bank’s 2% target.
However, analysts still see Powell at least opening the door to a rate cut as early as September. “His emphasis has shifted a bit toward a balance of risks within the Fed’s mandate,” he said. Christopher Hodgechief U.S. economist at Natixis in New York. “The Federal Reserve needs to get ahead of the weakness in the labor market, it seems as if the groundwork is being laid for a turnaround in September.”
The hearing in the House of Representatives
Powell’s semi-annual Senate appearance will be followed by a hearing in the House of Representatives scheduled for Wednesday at 14:00 GMT. While Powell’s initial comments focused on a review of the economy and monetary policy, questions from senators focused on housing costs and even more on proposed changes to banking regulations that the Fed is debating internally.
In his prepared remarks, the leader told senators that the inflation had been improving in recent months and “more good data would strengthen” the arguments for looser monetary policy. Fed has maintained its monetary policy rate in the range of 5.25% to 5.5% from July 2023.
Powell’s comments appeared to show growing faith that inflation will return to normal. central bank objectiveand contrasted the lack of progress in the first months of the year with a recent improvement that has helped strengthen the Fed’s confidence that price pressures will continue to slow.
“After a lack of progress towards our 2% inflation target earlier this year, the most recent monthly readings have shown further modest gains,” the banker said. “More good data would strengthen our confidence that inflation is moving sustainably towards 2%,” he added.
Source: Ambito
