Powell testifies before Senate, citing possible bank failures 📃

Federal Reserve Chairman Jerome Powell is testifying before the Senate Banking Committee, following his recent address to the House Financial Services Committee. During this session, Powell emphasized that the Federal Reserve's committee remains unconvinced about the assurance of reaching their 2% inflation target. He stated that the central bank would refrain from cutting interest rates until there is confidence in achieving this goal. However, he does anticipate rate cuts occurring this year.

• Powell remarked on the significant easing of inflation over the past year, which occurred without major increases in unemployment. 
• He noted that the labor market continues to be relatively tight.
• Powell stated that the Fed is far from adopting a central bank digital currency. 
• Powell highlighted challenges in the housing market and the low quantity of available homes for sale. 
• He acknowledged the potential for bank failures, particularly among small and medium-sized banks, due to exposure in commercial real estate (CRE), but not foreseeing this issue affecting large banks. 

Federal Reserve Bank of Cleveland President Loretta Mester, speaking in London, emphasized that while the Federal Reserve is in a position to lower interest rates this year, there is no immediate urgency to do so. She pointed out that the current Fed interest rate policy is well-placed to assess the economy's performance. Mester believes that any rate reduction will be gradual to manage risks effectively. She reiterated her expectation that inflation will return towards the 2% target, but more slowly than last year, and stressed the importance of confirming that inflation is indeed on a sustainable path back to 2% before lowering rates. 

Her comments align with those of Fed Chair Jerome Powell, who also spoke of the likelihood of reducing rates later this year if inflation continues to decline. Additionally, Mester mentioned the Fed's plan to slow down its balance sheet wind down process before completely stopping it.

The Dollar (USDIDX) is today one of the weakest currencies, thereby confirming a return to the downward trend after the recent rebound to levels above 104,300 points.

Source: xStation 5.