Federal Reserve Chair Jerome Powell on Tuesday expressed concern that holding interest rates too high for too long could jeopardize economic growth. He emphasized that while the economy and labor market remain strong despite some recent cooling, policymakers are focused on bringing inflation down to their 2% goal.
Economic Context and Inflation Progress
Setting the stage for a two-day appearance on Capitol Hill this week, Powell noted, “At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face.”
He added, “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
![](https://static9.depositphotos.com/1691014/1185/i/600/depositphotos_11853019-stock-photo-federal-reserve-system-logo.jpg)
Federal Open Market Committee Rate History
The commentary coincides with the approaching one-year anniversary of the last time the Federal Open Market Committee raised benchmark interest rates.
The Fed’s overnight borrowing rate currently sits in a range of 5.25%-5.50%, the highest level in some 23 years and the product of 11 consecutive hikes after inflation hit its highest level since the early 1980s.
Market Expectations for Rate Cuts
Markets expect the Fed to begin cutting rates in September and likely follow up with another quarter percentage point reduction by the end of the year. However, FOMC members at their June meeting indicated just one cut.
Powell and his colleagues have noted that recent inflation data has been somewhat encouraging after a surprise jump to start the year. Inflation as judged by the Fed’s preferred personal consumption expenditures price index was at 2.6% in May after peaking above 7% in June 2022.
Recent Inflation Data
“After a lack of progress toward our 2 percent inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell said. “More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”
Congressional Hearings
The statement is part of congressionally mandated semiannual updates on monetary policy. After delivering the remarks, Powell will face questioning from Senate Banking Committee members on Tuesday, then the House Financial Services Committee on Wednesday.
In past appearances, Powell has avoided making dramatic policy announcements while dodging politically loaded questions from committee members. The questioning could get contentious this year as Washington is on edge amid a volatile presidential campaign.
Democratic Concerns and Powell’s Response
Several Democratic committee members urged Powell to lower rates soon. “I’m concerned that if the Fed waits too long to lower rates, the Fed could undo the progress we’ve made on creating good paying jobs,” Sen. Sherrod Brown (D-Ohio), the committee chair, told Powell.
“If unemployment trends upward, you must act immediately to protect Americans jobs. Workers have too much to lose if the Fed overshoots [its] inflation target and causes a completely unnecessary recession.”
However, Powell has stressed that the Fed is not political and does not get involved in taking policy sides outside of its own roles. In his prepared remarks, he emphasized the importance of “the operational independence that is needed” for the Fed to do its job.
Economic Outlook
![](https://st5.depositphotos.com/15639662/66745/i/600/depositphotos_667451810-stock-photo-federal-reserve-system-central-banking.jpg)
His other remarks focused squarely on the stance of policy in relation to the broader economy. Recent data has shown the unemployment rate creeping higher and broad growth as measured by gross domestic product receding. Both the manufacturing and services sectors reported being in contraction during June.
But Powell said the data is showing that “the U.S. economy continues to expand at a solid pace” despite the deceleration in GDP. “Private domestic demand remains robust, however, with slower but still-solid increases in consumer spending,” he said.
DISCLAIMER
You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of SmallCapStocks.com (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.
The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov; the Financial Industry Regulatory Authority (the "FINRA") at www.FINRA.org, and relevant State Securities Administrator website and the OTC Markets website at www.otcmarkets.com. The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at www.sec.gov/consumer/cyberfr.htm, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.
The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.
By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: www.SmallCapStocks.com/Disclaimer and www.SmallCapStocks.com/Privacy-Policy
By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.
![Nathan Goldstein](https://smallcapstocks.com/wp-content/uploads/2024/01/image_160-1-150x150.png)
I’m Nathan Goldstein, a writer and political analyst focused on simplifying complex social and political issues. My writing breaks down the intricacies of today’s society and politics to make them more understandable for you. I’m committed to providing clear and well-informed insights.