Key takeaways from Fed Chair Powell’s testimony on Capitol Hill
What did Jerome Powell say about inflation trends?
Jerome Powell, the Federal Reserve Chair, acknowledged that inflation has come a long way since reaching a four-decade peak two years ago4. However, he emphasized that central bank officials still want to see more progress before cutting interest rates4. He noted some modest further progress in recent inflation readings but reiterated the need for greater confidence that inflation is sustainably moving toward the Fed's 2% target.
How has the Federal Reserve's key interest rate affected the economy?
The Federal Reserve's key interest rate influences borrowing costs across the economy. By raising rates, the Fed aims to make borrowing and investing more expensive, reducing overall demand for goods, services, and labor, and curbing inflation2. Conversely, lowering rates makes borrowing cheaper, stimulating economic activity and easing inflationary pressures. The Fed's decisions on interest rates can impact various aspects of the economy, including consumer spending, business investment, and housing market activity.
What expectations did Fed officials set for interest rate cuts this year?
Fed officials initially projected three interest rate cuts for this year but have since lowered their forecast to just one cut. However, some policymakers now suggest that no rate cuts may occur this year, emphasizing the importance of gaining greater confidence that inflation is moving sustainably toward the 2% target before making any reductions.