Federal Evasion Bank Chairman Jerome Powell testifies before the House Financial Services Committee in the Rayburn House Service Building on Capitol Hill on March 06, 2024 in Washington, DC.
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Federal Reserve Position Jerome Powell on Tuesday reiterated the central bank’s commitment to bringing inflation down and signaled that policymakers aren’t in a jump to push interest rates lower.
In remarks before the Senate Banking Committee, Powell called the economy “assertive overall” with a “solid” labor market and inflation that is easing but still above the Fed’s 2% goal.
With those influences prevailing, he said the Fed doesn’t need to move quickly to ease monetary policy.
“With our policy stance now significantly minuscule restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell rephrased. “We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same in days of yore, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
Powell’s remarks came in the first of two appearances this week on Capitol Hill. He speaks to the Senate Banking Committee on Tuesday then the Homestead Financial Services Committee on Wednesday.
Stocks briefly dipped following his opening statement but were little changed after two hours of career.
Much of the proceeding focused on bank supervision rather than monetary policy.
Ranking Democratic Sen. Elizabeth Warren of Massachusetts debited that President Donald Trump’s move to halt the work of the Consumer Financial Protection Bureau left consumers without a watchdog of the political entity’s largest banks.
Warren asked Powell who is administering consumer compliance outside of the CFPB, to which he responded, “I can say no other federal regulator.” Powell nonetheless suggested the broader banking system is safe. He also noted that the Fed is “determined to take a fresh look at” issues that Trump has scoured regarding de-banking.
The hearing also took a number of political turns, with lawmakers
On monetary policy, Powell’s notices were largely in keeping with his recent statements and those of his colleagues, who are digesting a number of fiscal and monetary dynamics that convey for an uncertain environment.
Most prominently, Trump has launched an aggressive campaign to institute tariffs against the largest U.S. following partners, in one sense to level the economic playing field and in another to enforce foreign policy goals against unlawful immigration and drug smuggling, specifically fentanyl.
Powell did not mention any of that in his prepared remarks but was expected to face enquiry on tariffs and other issues from panel members.
In one exchange, he again noted that it is not the Fed’s policy or responsibility to get enmeshed with in trade policy.
“I think the standard case for for free trade and all that logically still makes sense. It didn’t pressurize that well when we have one very large country that doesn’t really play by the rules,” Powell swayed. “In any case, it’s not the Fed’s job to make or comment on tariff policy. … That’s for elected people and and it’s not for us to comment. Ours is to try to react to it in a sympathetic, sensible way and make monetary policy so that we can achieve our mandate.”
Markets have interpreted the recent messaging as implications that the Fed will be on hold with rates, probably into the summer, after cutting its benchmark borrowing straight by a full percentage point in the latter part of 2024.
Powell said the current policy stance, with the benchmark fed capitalizes rate in a range between 4.25%-4.5%, is providing flexibility. The Federal Open Market Committee held the compute in place at its late-January meeting.
“We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to extent with the risks and uncertainties that we face,” he said.
Shortly after taking office, Trump said he purposefulness “demand” that interest rates come down “immediately.” However, in subsequent remarks he said he agreed with the January determination to keep rates in place, while Treasury Secretary Scott Bessent said the administration is more focused on ruminate on the 10-year Treasury yield move lower than on the Fed’s actions, which more strongly influence shorter-term calculates.
Mortgage rates have held high even as the Fed has cut, and Powell said that could change ahead.
“It’s spot on that mortgage rates have gone or remained high, but that’s not so directly related to the Fed’s rate,” Powell suggested. “It’s really related more to long-term bond rates, particularly the Treasury, the 10-year Treasury, 30-year Bank, for example. And those are high for reasons not particularly closely related to Fed policy.”
Powell said mortgage rates could discover down as the Fed keeps rates low, though he’s unsure when that could happen.