Fed Chair Jerome Powell noted that inflation dropped to 2.6% in May, but remains above the central bank’s target|@federalresrve|X
Federal Reserve Chair Jerome Powell testified before Congress on Tuesday and pointed to progress in lowering inflation and noted a cooling job market.
He also pointed out that the Fed needs to see a continuous slowing of the economy to cut rates.
Powell told the Senate Banking Committee that the Fed has made progress in tackling the worst inflation spike in 40 years, noting that inflation dropped to 2.6% in May but remains above the central bank’s 2% target.
He emphasized that elevated inflation is not the only risk, warning that cutting rates too late or little could weaken economic activity and employment. Powell also mentioned plans to revise a proposal on bank capital requirements, addressing concerns from US financial institutions about lending reductions.
From March 2022 to July 2023, the Fed raised its benchmark interest rate 11 times, reaching 5.3% to curb inflation. These hikes increased the cost of consumer borrowing, affecting mortgages, auto loans and credit cards.
Powell noted the job market has slowed, with the unemployment rate rising to 4.1% in June from 3.7% in December.
The Fed’s next meeting is on July 30–31, with markets watching for hints about future rate decisions. Projections suggest rate cuts could occur later this year.