On Tuesday, Federal Reserve Chair Jerome Powell voiced concerns that maintaining high interest rates for an extended period could threaten economic growth. Speaking before Congress, Powell noted that the U.S. economy is no longer overheated. “We are well aware that we now face two-sided risks,” he told the Senate Banking Committee, emphasizing that the Fed can no longer focus solely on inflation. Powell pointed out that “the labor market appears to be fully back in balance.”

During his testimony, Powell refrained from providing any signals about future interest rate actions, addressing questions from Democrats about potential job market risks and from

Republicans about the impact of inflation, which still exceeds the central bank’s 2% target. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell remarked in his appearances on Capitol Hill.

Jerome Powell, Chairman of the US Federal Reserve (Fed), indicated that the Fed is nearing a point of comfort regarding interest rate cuts, buoyed by signs of cooling inflation. “The inflation numbers have shown some modest further progress,” he said, adding that more positive data would enhance confidence in inflation moving sustainably toward the 2% target.

Additionally, Powell mentioned that U.S. regulators are close to agreeing on changes that would require big banks to hold significantly more capital, a potential major win for Wall Street banks.

Despite recent data showing a rising unemployment rate and slowing GDP growth, Powell maintained that “the U.S. economy continues to expand at a solid pace.” He noted that private domestic demand remains strong, with consumer spending showing slower but still solid growth.

Fed Chairman Jerome Powell speech highlights:

“Elevated inflation is not the only risk we face.”

“We are well aware we now face two-sided risks.”

“If we move too quickly or slowly on rate cuts, there are risks on both sides.”

“We are very much balancing those two risks these days.”

“Not likely next policy move would be a rate hike.”

“Labor market conditions have cooled while remaining strong, not overheated.”

“Most recent labor market data sent a pretty clear signal that the labor market has cooled considerably.”

“Labor market is more or less back to pre-pandemic levels.”

“Labor market is fully back in balance now.”

“US economy expanding at solid pace.”

“Risks to achieving employment, inflation goals coming into better balance.”

“Restrictive policy is helping put downward pressure on inflation.”

“Reducing restraint too soon or too much risks reversing inflation progress.”

“Reducing restraint too late or too little could unduly weaken economy, job market.”

“Policy rate cut not appropriate until Fed gains greater confidence inflation headed sustainably toward 2%.”

“First quarter data did not support the greater confidence in inflation path that Fed needs to cut rates.”

“Have made considerable progress toward 2% inflation goal, recent monthly readings show modest further progress.”

“Inflation remains above 2% goal.”

“More good data would strengthen our confidence on inflation.”

“Fed will carefully assess incoming data, balance of risks, appropriate policy path in rate adjustments.”

“We continue to make decisions meeting by meeting.”

“Remain committed to 2% inflation goal, keeping longer-term inflation expectations well-anchored.”

“Fed’s operational independence needed to take longer-term perspective in pursuit of goals.”

“Record is clear that central bank operational independence serves public well.”

“This is a choice we make as a country and it’s a good choice.”

“Our economy has been exceptional compared to global peers.”

“We have significant housing issues in the country.”

“Pandemic has created new distortions in housing.”

“Our tighter policy is having an effect on activity in housing sector.”

“For housing supply, best thing we can do is get inflation down.”

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