Federal Reserve Chair Jerome Powell testified before the House Committee on Financial Services on Wednesday. He focused on economic stability and policy direction. Powell reiterated the Fed’s commitment to promoting maximum employment and stable prices. This is based on the Federal Reserve’s latest Monetary Policy Report.
Powell emphasized the Fed’s balanced approach to achieving employment and inflation goals. He stated, “The risks to achieving our employment and inflation goals are coming into better balance.” He confirmed that decisions would continue on a meeting-by-meeting basis. These decisions will be guided by incoming data and economic outlooks.
During the Q&A, Powell addressed the Basel III endgame proposal. He supported further public commentary and noted the framework lacks binding enforcement. He also discussed the Supreme Court’s recent Chevron decision. Powell acknowledged its implications on agency interpretations of the law.
On inflation, Powell disagreed with the notion that the Fed must see core PCE inflation dip below 2% before considering a rate cut. He argued that waiting too long could push inflation well below the target. Instead, the Fed seeks confidence that inflation is sustainably moving towards 2%.
Powell attributed recent high inflation to strong demand clashing with constrained supply. He avoided commenting on fiscal policy but remarked on the unsustainable U.S. debt path. He affirmed the U.S. banking sector’s capitalization and liquidity. Powell stressed the need for evolving bank stress tests.
Powell expressed optimism about achieving low unemployment and low inflation, akin to pre-pandemic conditions. “We certainly can, and that’s the plan,” he stated.
