Jerome Powell’s Testimony (LIVE)🔍

The financial world turned its attention to Federal Reserve Chair Jerome Powell as he delivered his semiannual monetary policy report to Congress. This highly anticipated testimony came at a crucial juncture for the US economy and monetary policy.

Key Points from Jerome Powell's Testimony

Economic Outlook and Current State

• The US economy demonstrates overall strength, with GDP growth exceeding 2% in 2024, supported by resilient consumer spending. However, equipment investment shows signs of slowing.

• Inflation has made substantial progress toward the Fed's 2% goal, though it remains somewhat elevated. Total PCE rose 2.6% in the 12 months to December, while core PCE increased 2.8%.

• The labor market maintains a stable position with the unemployment rate holding steady at low levels. Notably, Powell emphasized that labor conditions are not currently a source of inflationary pressures.

Policy Stance and Future Direction

• Powell stressed there is no urgency to adjust monetary policy, indicating a patient approach to future rate decisions.

• The Fed is prepared to maintain policy restraint for a longer period if the economy stays strong and inflation doesn't move decisively toward the 2% target.

• Conversely, the Fed stands ready to ease policy if they observe unexpected labor market weakness or faster-than-anticipated inflation decline.

Framework Review and Long-term Strategy

• A comprehensive review of the Fed's monetary policy framework is underway and will conclude by late summer.

• The 2% inflation target will remain unchanged and is not subject to review.

• The framework review will incorporate lessons from the past five years and include public engagement through Fed Listens events.

Risk Assessment

• Powell emphasized that policy is well-positioned to handle current risks and uncertainties.

• The Fed remains attentive to risks on both sides of its mandate - maximum employment and price stability.

• The committee views the risks to achieving its goals as roughly balanced.

Powell's testimony reflects a cautious and balanced approach, suggesting the Fed will require substantial evidence before making any significant policy adjustments. The focus remains on achieving sustainable progress toward the 2% inflation target while maintaining strong labor market conditions.

There was slight reaction to the testimony on EURUSD pair. Source: xStation