Federal Reserve Chairman Jerome Powell testifies at a hearing of the Senate Committee on Banking, Housing and Urban Affairs on March 7. The chairman told the committee on Tuesday that interest rates cannot be adjusted because inflation remains too high. File Photo by Jemal Countess/UPI | Licensed Photo
July 9 (UPI) — Federal Reserve Chairman Jerome Powell told a Senate committee Tuesday that while inflation remains above benchmark levels, the Fed recognizes that keeping interest rates at current levels for too long could harm the economy.
In prepared remarks to the Senate Banking, Housing and Urban Affairs Committee, Powell said the committee won't lower interest rates “until we have greater confidence that inflation is sustainably moving toward 2 percent.”
He said inflation continues to fall, but that first-quarter economic data does not support that trend. He said the Governing Council needs more “good data” before moving forward with rate cuts.
“We know that loosening policy restraints too soon or by too much could stall or reverse the progress made to date in improving inflation,” Powell said. “Loosing policy restraints too late or by too little could overly weaken economic activity and employment.”
“In considering adjustments to the target range for the federal funds rate, the Committee will continue its practice of carefully assessing emerging data and their implications for future prospects, the balance of risks, and the appropriate direction of monetary policy.”
The Federal Reserve's key interest rate has been held at a 23-year high for about a year, but inflation remains stubbornly above the 2% mark. The interest rate, which affects borrowing costs across the economy, helped slow inflation last year but is showing little progress in 2024.
Some senators urged Chairman Powell and the Fed's board to cut interest rates quickly.
“We are concerned that if the Fed waits too long to cut interest rates, it could undo the progress we've made toward creating good-paying jobs,” Sen. Sherrod Brown, D-Ohio, the committee's chairman, said, according to CNBC.
“With unemployment trending upward, we must act now to protect American jobs. Workers have too much to lose if the Fed overacts. [its] It will send inflation off target and cause a totally unnecessary recession.”