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With inflation in the United States still excessive, most Federal Reserve officials expect to raise interest rates further this year, Chair Jerome Powell said in prepared testimony to be delivered to a House committee.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Powell said on the first of two days of semi-annual testimony on Capitol Hill.
Even so, the Fed last week kept interest rates unchanged after 10 straight hikes so it could take time to gauge how higher borrowing rates have affected the economy, Powell said. The contrast between the Fed’s stated concern over still-high inflation and its decision to skip a rate hike has heightened uncertainty about its next moves. The hazier messaging suggests that Powell is seeking to balance competing demands from those Fed officials who want to keep raising rates and others who feel the central bank has done enough.
In his remarks Wednesday, Powell also suggested that the Fed chose to keep its key interest rate steady so it could assess the impact of three large bank failures this spring on the banking sector and whether the failures would reduce credit to consumers and businesses and slow the economy.
The Fed’s rate increases have made borrowing for consumers and businesses more expensive across a range of loans, including home and auto loans, credit cards and business borrowing. The goal has been to cool inflation by slowing spending and hiring.
Powell reiterated that the Fed still hopes to pull off a tricky feat: Weaken the economy enough to tame inflation, without undermining it so much as to cause a deep recession.
“There is a path to getting inflation back down to 2% without having to see the kind of sharp downturn and large losses of employment that we’ve seen in so many past instances,” the Fed Chair said. “It’s possible.”
Yet both Republicans and Democrats in the House and Senate may express misgivings about whether the Fed can pull off such a feat. Republicans might raise concerns that the Fed isn’t moving fast enough to defeat high inflation. Democrats may press Powell on whether the central bank has already done enough and whether further hikes could lead to a harsh recession.
Powell has sought to straddle both views regarding the Fed’s progress on inflation. Last week, he said that inflation remains too high and added that there hasn’t been nearly as much progress in slowing it as the Fed would like.
At the same time, the Fed Chair added, “the conditions that we need to see in place to get inflation down are coming into place.”
The sometimes-conflicting messages suggest that Powell has sought to balance competing demands from hawks and doves on the Fed’s interest-rate setting committee. For now, the hawks seem to predominate: Last week, 12 of the 18 policymakers indicated that they envision at least two more rate hikes this year, and four predicted one additional increase. Only two officials forecast that the central bank will keep its key rate at its current level of 5.1% through year’s end.
On Wednesday, Republicans on the House committee may also raise concerns about the Fed’s regulation of banks in the aftermath of three large bank failures since March.
Michael Barr, the top regulator on the Fed’s board, has suggested that he would support requiring banks to set aside more capital to offset potential loan losses. Such a move is opposed by the banking industry, which argues that doing so would reduce banks’ ability to lend.
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Republished with permission of The Associated Press.
3 comments
Earl Pitts American
June 21, 2023 at 10:18 am
Good morning America,
These types of fiscal policies are exactly modeled after the rise of The Third Riech in pre WWII Nazi Germany.
Which is why I, Earl Pitts American, am calling on everyone, Conservatives, Dook 4 Brains Lefties, Dook 4 Brains RINO’s, Dook 4 Brains NPA’s Independants, along with every Dook 4 Brains [whatever] Citizen to cast aside your support of the Nazi Democrats and take the Vote Conservative “SAVE AMERICA PLEDGE” with me, Earl Pitts American.
Here it is:
SAVE AMERICA PLEDGE
I, Dook 4 Brains [insert your name] ___________ hereby cast aside my former love of The Democratic Party and pledge to vote for all conservative candidates in local, State, and National political races for the next 65 years, or until I die, whichever comes first.
Signed: [enter your name here] _________________.
*Federal pledge form a7643390*
Note: This is a National Emergency and normally we would frown on you entering your pronouns prior to or after your name on the SAVE AMERICA PLEDGE – however if it makes you feel good you may do it on this Form. Heck many of you might feel the need to enter “Dook 4 Brains” prior to your name and thats OK too. All are welcome.
Thank you America for pledging to save America,
Earl Pitts “That Save America Guy” American
Anonymous EPA Fan
June 21, 2023 at 10:41 am
Earl you are a certified genious,
I dont know why conservative State officials are light years behind your esteemed capibilities and political understanding.
This Pledge To Save America will be studied for hundreds of years to come as the greatest American freedom from evil document ever.
Kudos Earl and thank you for saving America. I am currently running for a very high level political office and thus must sign off anonymous.
Thanks Earl.
Tjb
June 21, 2023 at 11:04 am
What is the Republicans plan to reduce inflation? Is it —- banning books and drag shows?
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