US Federal Reserve Chair Jerome Powell began two days of testimony before Congress Wednesday with a note of caution: interest rates likely aren’t coming down anytime soon.
Powell spoke to the House Financial Services Committee a week after the FOMC paused its campaign of ratcheting up rates since March 2022.
But that doesn’t mean the Fed is done working to get inflation down to its 2% target, Powell said.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” he said.
At its meeting last week, the Fed maintained its key lending rate at a range of 5-5.25%, and officials suggested that two more 0.25% rate hikes could be coming later this year.
“We’re moderating that pace, much as you might do if you were to be driving 75 miles an hour on a highway, then 50 miles an hour on a local highway, then as you get closer to your destination you try to find that destination you slow down even further,” Powell said.
The chairman also seemed to endorse Congress enacting new banking regulations following the failure of multiple regional banks, noting the “importance of ensuring we have the appropriate rules and supervisory practices for banks of this size.”
That earned Powell some pushback from Rep Patrick McHenry, R-North Carolina, in his opening remarks.
“There’s a great deal of uncertainty on the horizon. Uncertainty from Fed supervision and regulation is the last thing the well-capitalized banking system needs now,” McHenry said.
Michael Barr, the Fed’s vice chair for supervision, is “injecting politics into policy,” he added.
The Federal Reserve next meets on July 25-26.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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