Jerome Powell Speech Today: Fed Chair Talks Rates, Economy, Banking Regulation, and More in Congress Testimony (2024)

What the Fed Chair Said

The Federal Reserve chair faced questions from both sides of the aisle in the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday. Senators Sherrod Brown and Tim Scott criticized the central bank chief for high interest rates and proposed regulations on banks.

In his opening remarks to the Senate committee, Powell said the risks to the economy have become better balanced, allowing him to broaden his focus beyond getting inflation down. He’s watching carefully for signs of weakness both in the job market and in the broader economy, the central bank chief said.

Powell's testimony to the House Committee on Financial Services covered inflation, the balance sheet, and other topics.

Interest rates aren’t going back to the near-zero territory they were in for most of the 15 years before the Covid-19 pandemic, Federal Reserve Chair Jerome Powell said on Wednesday.

“I think we probably won't go back to that era between the global financial crisis and the pandemic, [when] rates were very low and inflation was very low,” Powell said.

Rep. Byron Donalds, a Republican from Florida, asked Powell about how the process of lowering interest rates would proceed once the Fed began to cut. The Fed chair said that structural changes in the U.S. economy could mean a period of both higher inflation and higher interest rates than before, but that it is too soon to put any firm numbers on it.

Powell said that the so-called neutral level of interest rates, which neither stimulates nor restricts economic activity, is affected by slow-moving forces that aren’t always observable in real time. The Fed has held the federal-funds rate at a range of 5.25% to 5.5% since July 2023, which Powell sees as above the U.S. neutral rate.

“It feels like policy is restrictive, but not intensely restrictive,” Powell said. “So that suggests that the neutral rate of interest, at least as of now, has risen somewhat.”

A U.S. recession or meaningful increase in unemployment won’t be required to get inflation down to a 2% annual rate, Federal Reserve Chair Jerome Powell said on Wednesday.

“There is a path to getting back to full price stability while keeping the unemployment rate low,” Powell said. “There is that path. We've been on it. We're very, very focused on staying on that path.”

He spoke in response to a question from Rep. Wiley Nickel, a Democrat from North Carolina, who asked Powell if the U.S. economy was on track for a so-called “soft landing.”

For the Fed, seeking to remain on that path means that policymakers are weighing both their price-stability and maximum-employment mandates. Officials are watching for data that convinces them that inflation is sustainably moving toward a 2% annual rate, while also keeping an eye out for signs of a weakening labor market.

“We’re at a place now where the risks to the two mandates are much more in balance than they were before, and that means it's not just about getting inflation down,” Powell said. “The job is not done on inflation, we have more work to do there. But at the same time, we need to be mindful of where the labor market is.”

The personal consumption expenditures price index—the Fed’s preferred inflation measure—was up 2.6% from a year earlier in May. The June jobs report on Friday showed another month of strong job creation, but with a rising unemployment rate, now at 4.1%, and slower wage growth.

The Federal Reserve doesn’t need to see inflation return to its 2% annual target to consider lowering interest rates, Chair Jerome Powell said on Wednesday. Waiting that long would risk pushing the economy into a recession.

Responding to a question from Rep. Mike Flood, a Republican from Nebraska, Powell said that the Fed is committed to returning inflation to a 2% annual rate. But it could be ready to cut interest rates sooner—once officials are sufficiently confident that inflation will go back to the target level.

“You don't want to wait until inflation gets all the way down to 2%, because inflation has a certain momentum,” Powell said. “If you waited that long, you’ve probably waited too long, because inflation will be moving downward and will go well below 2%, which we don't want.”

The personal consumption expenditures price index—the Fed’s preferred inflation measure—was up 2.6% from a year earlier in May.