Powell will defend before Congress the Fed’s decision not to lower rates yet

Powell will defend before Congress the Fed’s decision not to lower rates yet


The president of the Federal Reserve (Fed), Jerome Powell, will defend next week before the US Congress the central bank’s decision not to lower interest rates for now and wait for inflation to decline sustainably.

This is clear from a report that was published this Friday by the institution and that Powell will present on March 6 and 7 in the financial services committees of both Houses, a procedure that must be carried out by mandate every six months.

The Federal Open Market Committee (FOMC) – the Fed’s monetary policy body – “does not expect it to be appropriate to reduce the target range (interest rates) until it has gained “greater confidence that inflation is moving sustainably towards 2%”points out the text.

Powell will thus remain faithful to the regulator’s speech, which has kept rates unchanged since its July 2023 meeting, in the range of 5.25% and 5.5%its highest level since 2001. All this after eleven increases carried out since March 2022 to control inflation, which exceeded 9% in the summer of that year.

Since then it has been decreasing little by little until 3.1% recorded in Januarythe last known data.

Powell will also explain in Congress that the Fed considers that “it is likely that the interest rate is at its peak for this adjustment cycle.

“As labor market tightness has eased and inflation gains have continued, risks to achieving employment and inflation targets of the Committee have been moving towards a better balance,” the report notes.

Even so, he adds, the Committee “remains very attentive to inflationary risks” and “is very aware that high inflation imposes significant difficulties”, so, before lowering rates “it must be certain that inflation is falling.”

In considering any adjustments, incoming economic data, evolving economic prospects and the risk balance.

In addition to giving a speech before legislators and senators, Powell will have to submit to your questions and it remains to be seen, therefore, if it gives any clue as to when rates could begin to fall.

At the press conference after the Fed’s latest announcement, Powell said that if the economy evolves “broadly as expected, it will probably be appropriate to begin reducing rates in sometime this year”.

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