At 2:00 pm today, Jerome Powell, who testifies to Congress twice a year, began appearing before the Banking, Housing, and Urban Affairs Committee of the US Senate. Following the publication of the Semi-annual Monetary Policy Report, the Fed chairman took questions. Powell’s comments caused the US dollar, stock markets, and other asset classes to experience volatility.
Fed Chairman Jerome Powell Reports to the House Financial Services Committee
Following his hearing before the House of Representatives Financial Services Committee, Powell is now in his second day of evidence before the US Congress. Chairman Powell was questioned by US senators on a range of subjects, including the state of the economy, the prospects for inflation, and the direction of monetary policy.
Semi-Annual Monetary Policy Report
The Federal Reserve Chairman reaffirmed the Fed’s commitment to their 2% inflation objective on Wednesday during a hearing in the US House titled “The Federal Reserve‘s Semi-Annual Monetary Policy Report,” while noting that it is still a long way from being reached. Powell countered this view with some doveish comments, stressing the need to pace interest rate increases and implying that “raising interest rates can be painful and slow demand.” The US Dollar fell in response, with the US Dollar Index (DXY) returning to 102 and the EUR/USD approaching levels near 1.10.
Powell is scheduled to emphasize that they would continue to make policy decisions meeting by meeting, depending on incoming data, implications for the outlook, and the balance of risks, about the policy outlook.
Fed Announces Interest Rate Decision
According to expectations, the US Federal Reserve (Fed) “passed” this month and decided to finish its cycle of five interest rate hikes. FED declared its decision about interest rates. In line with forecasts, the Fed Open Market Committee (FOMC) maintained the policy rate at 5 to 5.25 percent.
The most recent indicators showed that economic activity was still expanding at a moderate clip, according to the FOMC’s decision-wording. The statement claimed that the US banking system is strong and resilient:
Keeping the interest rate range unchanged at this meeting will allow the Committee to consider additional data and its implications for monetary policy. In determining the extent of additional tightening that may be appropriate to bring inflation to 2 percent over time, the Committee will take into account the cumulative tightening in monetary policy, lags in the effects of monetary policy on economic activity and inflation, and the economic and financial situation.
Monetary Policy Actions
Rate increases and the Fed’s efforts to reduce its bond holdings on its balance sheet are two examples of monetary policy actions that frequently have lag times. In light of the effects that tighter policy has had on the economy, authorities opted to forego increasing at this month’s meeting.
Powell stated that although there are indications that the labor market is relaxing, such as an increase in labor force participation in the crucial 25 to 54 age group and some moderation in earnings, conditions are still tight. He did point out that there are still considerably more unfilled positions than there are workers to fill them.
About Jerome Powell
On February 5, 2018, Jerome H. Powell began his four-year term as the Chair of the Board of Governors of the Federal Reserve System. On May 23, 2022, he was reappointed to the position and given a second four-year term. In addition, Mr. Powell leads the Federal Open Market Committee, which is the main decision-making body for the System’s monetary policy.
Since being appointed to the Board of Governors on May 25, 2012, to cover a term that had not yet ended, Mr. Powell has been a member. On June 16, 2014, he was reappointed to the Board and sworn in for a term that would end on January 31, 2028.
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