Fed Chair Powell concludes Senate testimony

Fed Chair Powell concludes Senate testimony

Federal Reserve Chair Jerome Powell concluded his two-day testimony before Congress today, reiterating the central bank's stance on tariffs and interest rates. Powell's testimony before the Senate Banking Committee came after a day of scrutiny before the House panel, where he addressed concerns about the Fed's policy on tariffs and their impact on inflation.

Powell informed lawmakers that the Fed will maintain its unchanged key fed funds rate until it gains a better understanding of President Trump's tariff policy's impact on consumer prices. He emphasized that despite elevated uncertainty, the economy remains solid, with a low unemployment rate and a labor market at or near maximum employment. Inflation has eased significantly but remains above the Fed's 2 percent longer-run objective [1].

Powell highlighted the uncertainty surrounding tariffs, noting that their ultimate level and related economic effects remain uncertain. He stated that increases in tariffs this year are likely to push up prices and weigh on economic activity. Powell also noted that near-term measures of inflation expectations have moved up over recent months, with tariffs cited as the driving factor [2].

Powell's stance differs from two other Fed rate-setting committee members, Christopher Waller and Michelle Bowman, who are leaning towards a rate cut in July. Powell remains resolute in maintaining rates until inflation decreases, with the US Fed and markets waiting until September to determine if inflation in June, July, and August has actually been tamed in the face of reciprocal tariffs [1].

Powell's prepared Senate testimony mirrored his presentation to the House, where he likely repeated his message that tariffs are expected to raise inflation. Investors are pricing in rate cuts for September and December, reflecting expectations that Powell's stance may shift if inflation remains elevated [3].

The Federal Reserve's 'dot plot' indicates 50 basis points of cuts for the second half of 2025, with the next three FOMC meetings scheduled for July 29-30, September 16-17, and October 28-29. The monthly CPI data is released mid-month, providing time for the US Fed officials to decide on the rate cut decisions [1].

Powell emphasized that the Fed's obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. He stated that the Fed will balance its maximum-employment and price-stability mandates, keeping in mind that, without price stability, it cannot achieve the long periods of strong labor market conditions that benefit all Americans [2].

References:
[1] https://www.financialexpress.com/business/investing-abroad-fed-chair-powell-to-face-tough-questions-from-lawmakers-today-3892285/
[2] https://www.federalreserve.gov/newsevents/testimony/powell20250624a.htm
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3SS1K3:0-fed-s-powell-heads-to-senate-panel-for-second-day-of-testimony/