Federal Reserve Chairman Jerome Powell appeared before the Senate Banking Committee on Tuesday to kick off his semi-annual report to Congress. He is scheduled to appear before the House Financial Services Committee tomorrow.
Jennifer Schonberger of Yahoo Finance reports.
Powell said he was encouraged by evidence that inflation was moderating and that more “good data” would help get it to the level the Fed wants, suggesting the central bank is nearing a point where it would feel comfortable cutting rates.
In testimony before Congress on Tuesday, he said inflation was “showing some further progress” after a first-quarter increase, and that “further better data would increase our confidence that inflation is moving sustainably toward 2 percent.”
It was the second time in the past week that Powell has sounded optimistic about the state of inflation, noting on Tuesday that the two most recent inflation readings, from April and May, “suggest that we are returning to a disinflationary trajectory.”
The next reading on inflation, as measured by the consumer price index, is due to be released on Thursday.
Inflation is not expected to worsen, but it is not expected to fall either. Based on the “core” CPI, which excludes volatile food and energy prices over which the Fed has no control, inflation is expected to stabilize at 3.4% in June, from the same level in May.
In his prepared remarks, Powell said the Fed would continue to set monetary policy at each meeting, but he reiterated that cutting interest rates too quickly could reverse progress made to contain inflation, while keeping rates high for a long period of time could weaken the economy and job market.
Democrats are expected to pressure Powell to cut rates soon, while Republicans are likely to press him on bank capital rules and stress that rates should not be cut so close to the November elections.
In his testimony, Chairman Powell emphasized that Congress has entrusted the Fed with the operational independence it needs to take a “long-term view” in pursuing its dual mission of maximum employment and stable prices.
