Jerome Powell Testimony Live: Fed Chair speaks on policy outlook before Congress
Jerome Powell, Chairman of the United States (US) Federal Reserve (Fed), repeated that they do not need to be in a hurry to adjust the monetary policy in his prepared remarks for delivery on the first day of his testimony on the semi-annual Monetary Policy Report before the Senate Banking Committee.
Powell testimony key takeaways
“Policy is well-positioned to deal with risks, uncertainties.”
“We can maintain policy restraint for longer if economy remains strong and inflation does not move toward 2%.”
“We can ease policy if labor market unexpectedly weakens or inflation falls more quickly than expected.”
“The US is economy strong overall; inflation is closer to 2% goal but still somewhat elevated.”
“Fed’s framework review will not include a focus on inflation target, which will remain 2%.”
“Fed will wrap up framework review by late summer.”
“We are in a pretty good place with this economy.”
“Want to make more progress on inflation.”
“Don’t see any reason to be in a hurry.”
“We are not in recession.”
“Not for the Fed to comment on tariff policy”
“Clearly not allowed under the law for President to remove a Fed board member.”
This section below was published as a preview of Federal Reserve Chairman Jerome Powell’s testimony at 10:00 GMT.
- Jerome Powell’s testimony in the US Congress will be a top-tier market-moving event this week.
- New clues on the Federal Reserve interest rate path are awaited.
- US Dollar, stock markets and other asset classes could see big swings with the Fed Chair’s words.
Jerome Powell, Chairman of the United States (US) Federal Reserve (Fed), will deliver the Semi-Annual Monetary Policy Report and testify before the Senate Banking Committee on Tuesday. The hearing, entitled “The Semi-Annual Monetary Policy Report to the Congress,” will start at 15:00 GMT and it will have the full attention of all financial market players.
Jerome Powell is expected to address the main takeaways of the Fed’s Semi-Annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed noted that financial conditions continue to appear “somewhat restrictive” and reiterated that policymakers will weigh data when deciding on future policy moves.
In a long Q&A session, US representatives are expected to ask Powell about the interest rate path, inflation developments, and the economic outlook. They are also very likely to inquire about how US President Donald Trump’s policies could influence prices, growth prospects and the monetary policy moving forward.
The CME Group FedWatch Tool shows that markets price in a less-than-10% probability that the Fed will lower the policy rate by 25 basis points (bps) in March after the latest employment report reaffirmed tight conditions in the labor market.
In January, Nonfarm Payrolls (NFP) rose 143,000. Although this reading came in below the market expectation of 170,000, the US Bureau of Labor Statistics (BLS) announced upward revisions to previous NFP prints. “The change in total Nonfarm Payroll employment for November was revised up by 49,000, from +212,000 to +261,000, and the change for December was revised up by 51,000, from +256,000 to +307,000. With these revisions, employment in November and December combined is 100,000 higher than previously reported,” the BLS noted in its press release.
The market positioning suggests that the US Dollar (USD) has little room left on the upside even if Powell confirms that they will hold the policy unchanged in March. On the other hand, the USD could come under selling pressure in case Powell adopts an optimistic tone about the inflation outlook and leaves the door open for a rate reduction at the next policy meeting.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
About Jerome Powell (via Federalreserve.gov)
“Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System’s principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028.”